Sterling Dollar is at 30 year high today - and in the last week we have seen a 200% increase in the number of clients fixing the rate forward to buy their dollars for certain dates throughout 2008.
[USPRwire, Thu Nov 08 2007] Sterling Dollar is at 30 year high today - and in the last week we have seen a 200% increase in the number of clients fixing the rate forward to buy their dollars for certain dates throughout 2008.
A forward contract guarantees a foreign exchange rate for a future date irrespective of currency movements between the deal date (when the rate is agreed) and the settlement date (when the funds are transferred).
Clients are looking to buy in countries pegged to the Dollar (Dubai, for example), as houses in these countries have become much more affordable.
Currency exchange specialist, World First, has seen a number of its clients reconsidering house purchases in Europe, due to the effect of the strong Euro against the pound. The Euro has hit a three year low against the pound, leading to big increases in the cost of property abroad for UK buyers.
Many buyers have also found themselves paying far more for a house on completion then they initially budgeted for, because the Euro has moved in the period between offering for the house and paying for it. Buyers who calculated the cost of foreign property at the exchange rate three months ago are now faced with paying up to 3.5% more for their property. For example, a property costing €250K in August at a rate of 1.47 would cost £170,068, the same property now will cost £176.056 at a rate of 1.42.
Some buyers have protected themselves from this by setting up a ‘forward contract’ in advance of the rate change. Many people do not know about this possibility though, and run a serious financial risk when buying abroad and the currency goes against them.
However, some people are taking advantage of the strong Euro, according to World First, which has seen a 26% increase in Euro to Sterling deals over the last two months compared to the same two months last year. **
Economists put the recent strength of the Euro down to a number of factors, including the global financial turmoil and liquidity squeeze, triggered by the US sub-prime mortgage market, and the weakness of the dollar, which has led speculators to the Euro.
ENDS
For further information, please contact Emma Crosthwaite on 0777 623 1692 or Elisabeth Dobson on 0207 801 3025
Notes to editors
*A forward contract guarantees a foreign exchange rate for a future date irrespective of currency movements between the deal date (when the rate is agreed) and the settlement date (when the funds are transferred). No payment is made until the settlement date, except for a small deposit which is required to hold the rate for you. Buyers can fix a forward exchange rate for any period from 3 days up to 1 year in advance. A deposit of 2% to 10% is usually required for a forward contract. The company has seen increased interest in forward contracts as a result of the recent exchange rate shift.
** The time periods compared were: 01/09/06 – 30/10/06 and 01/09/07 – 30/10/07
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