CURRENCY CONVERSION

As you will be paying in euros, you will have to convert your Sterling, if a UK resident, or your local currency.

It is always cheaper to use a foreign currency broker as opposed to a bank as you will get a far better exchange rate. You will need to register with at least one foreign currency broker and open a trading account. This is a very simple procedure.

We have accounts with two foreign currency brokers, Moneycorp and FX Solutions, as it is quite often the case that one will be offering a better rate than the other and it is sometimes possible to play them off against each other and obtain a slightly better rate. Even a very small difference of rate between currency brokers can enable you to save hundreds of pounds, especially if converting a large amount of currency. In fact when we first registered with one specific foreign currency broker he actually told us to ring around other brokers for rates before dealing. In addition, the more you exchange, the better deal you get. We always exchange together in order to double up on the amount being traded.

It is also possible to obtain a forward contract if you want to lock into a rate when it is looking favourable. The rate quoted on a forward basis will always be less than the present rate, but it could be significantly higher than the actual rate will be at that future date. However you take your chance. If you are risk averse, then this is probably the best option, as you lock into a known rate at an agreed future date. In our experience the further into the future, the lower the rate. A margin deposit of ten per cent of the amount being traded will be required to be paid within three days of the trade and the remainder a few days before the future's expiry date. Any converted currency can be held until required in the currency broker's client account.

Over the past two years, we have seen the rate vary between 1.41 and 1.50 euros to the GBP The average has been around 1.46 .

NB: If opting for a forward trade with a future expiry date you will not be able to have access to your euros until that expiry date regardless of having paid the balance due in sterling. If you do need access to this converted currency before that date due to a change of plan, you will be charged an additional fee by the currency broker as they have to buy that currency from their bank ahead of the original planned date. A typical fee would be around £20 to draw down early an amount of 20,000 euros.

Page last updated: 14th February 2007