What to Consider When Transferring Money to Australia
Most migrants will need to convert their money into Australian dollars and transfer the funds into their Australian bank account at some stage during the migration process. The timing of this transaction will vary between individuals; some may transfer funds before leaving home, while others may wait until they have arrived in Australia. Some may decide not to sell up their assets until they have committed to staying in Australia, maybe a year or so later.
This presents a risk to the migrant, because exchange rates can fluctuate quite significantly and the rate may not be beneficial at the time your funds are ready to transfer. The risk can be minimised in two ways:
- By monitoring the exchange rate, so you get to know what a "good rate" may be, and
- By arranging a "forward contract" to buy Australian dollars at an agreed rate, eliminating the risk that the rate will drop by the time you have your funds ready.
A Brief History
At the start of 2004, the Australian dollar had strengthened to a rate of about $2.35 against the Pound Sterling. Through the first half of 2004, Sterling gained ground, but peaked at around $2.67 in June. Since then, the rate has returned to around $2.40 (June 2005). In the last one and a half years the Pound has moved Approximately 22% against the Australian Dollar.
So Where's It Going Next?
Sorry, we've got no idea! Of course, plenty of people have their theories, but the reality is, nobody knows. However, here are a few general suggestions to help you in the overall process: - By buying your currency in several blocks you are able to secure an average exchange rate for the total amount transferred abroad; this will spread your risk. The key is to ensure that you buy a significant portion straight away otherwise you are not addressing this risk. Many people use a forward contract for this as it only involves putting down a 10% deposit to secure the exchange rate. The rate can then be held for up to two years, at which point the balance (the remaining 90%) needs to be settled. This way of buying currency is flexible and can accommodate changes in the time scale originally agreed due to house sales falling through etc.
This type of strategy is utilised by many businesses as they need to protect their profit margins. It is always tempting to "wait for a better rate" but only you can decide how much of your wealth you want to expose to risk (you may decide to fix an exchange rate for half or all of your assets). For the remainder, your consultant will monitor the market on your behalf with some pre-set "target" levels as well as a cut off level should the exchange rate fall dramatically.
- Decide on a bank or broker to exchange with: register with one - there's not normally any obligation to trade, so you can get a feel for the quality of their service and can compare the rates they offer to those of your bank
- Decide whether to exchange all your funds in one go, or in a number of chunks, thereby spreading the overall risk
- Consider a forward contract if you already have your visa but won't move for a while
- Do your research and listen to the opinions of others, but don't necessarily rely on them - make up your own mind
- Set a target rate and either monitor the rate closely or give instructions to your broker - as we've seen recently, rates can change significantly over just a few days
- Hope for the best!
There are often many factors that influence the foreign exchange markets and because of this it is impossible to predict future exchange rates exactly. Currency specialists HIFX, however, are world renowned for their market views with Reuters consistently ranking them in the worlds top three most accurate foreign exchange forecasters globally.
Although they cannot predict the future, their team will implement a strategy, free of charge and without any obligation, to help migrants achieve the best exchange rate possible. To contact HIFX for a free currency consultation, simply complete the registration form by clicking on the banner below (place banner for referrals below) and a currency specialist will contact you directly.
