020 7898 0500The live exchange rates shown on this page are the ‘interbank’ exchange rates. These should be seen as an indication of the market and are therefore designed for informational purposes only. If nothing else, the fluctuations that can occur from one second to the other should help demonstrate the importance of employing currency risk mitigation strategies, if your business has dealings in foreign currencies.
To find out more about how Smart Currency Business can help you realise your business growth ambitions, email [email protected] or give one of our team a call on 020 7898 0500.
Frequently Asked Questions
Why do exchange rate rates change?
Exchange rates change every minute of the day. With trillions traded across an average year, currency markets are among the most volatile and unpredictable in the entire financial system.
The rates move for many reasons, including any political or economic news that might indicate a change in the relative value of a given currency pairing. For example, the pound typically weakens when interest rates are cut but strengthens when inflation rises. It can also weaken if the prime minister reshuffles his cabinet or strengthen if manufacturing output increases.
Currency movements like these are rational, but rates can also be driven by ever-changing sentiment and irrational panic. When that takes hold, the relative value of currency pairings can swing sharply, sometimes by as much as 5% over the course of just a few weeks.
What are interbank rates?
Interbank rates are the exchange rates offered by banks to one another. They are the rates you’ll see on the news or on currency tracking sites, but this will not always be the rate you receive when you book a contract.
Commercial exchange rates (the kind you’ll be offered by a bank or a currency service) take their margin into account. This means you’ll often pay a small percentage to fund their operating costs, as well as to benefit from their unique service offering.
Can anyone predict exchange rates?
Despite what some people say, nobody can accurately predict the exchange rate at a point of time in the future. There are simply too many unknown factors and variables that could come up to predict the rate with any confidence beyond a few hours, particularly in today’s unsettled world. Even the most qualified bank specialists will only be able to offer a best guess.
How can currency movements affect my business?
The chart below shows a basic introduction to how currency movements can impact your profit margins over several months.
| Timeframe | Highest % fluctuation | Impact on $1,000,000 transfer |
|---|---|---|
| 1 hour | 0.8% | £6,956 |
| 1 day | 4% | £34,784 |
| 1 week | 6% | £52,172 |
| 1 month | 10% | £90,436 |
| 3 months | 15% | £126,088 |
As you can see, even relatively modest movements can wreak havoc on your cashflow. Should those changes become more extreme in the time between booking a contract and settlement, even normally well-protected businesses could see their profit margins washed away.
How does Smart Currency Business protect me from adverse movements?
Smart Currency Business utilises a variety of solutions to protect businesses from currency risk, such as forward contracts and FX options. Every business is different, which means our suggestions will differ based on your specific situation.
Our expert team will work with your business to implement the right solution for your objectives and risk appetite. They are on hand to provide ongoing, consultative support, ensuring your treasury is insulated from volatility whatever happens.
Find out how we can help your business
Avoid the risk of profit erosion from fluctuating rates with Smart Currency Business products and services
Forward Contracts
Forward contracts enable you to reserve a price for buying or selling currencies on a specific date in the future. They can be an important part of a company’s hedging toolkit. Read more
Spot Contracts
A spot contract is the most basic of all foreign exchange products available. It involves the purchasing or selling of currency for immediate settlement on the spot date. Read more
Option Contracts
Foreign exchange options give businesses who hold an option the right to buy or sell currencies at an agreed exchange rate and date should the exchange rates move against them. Read more
