Are there ways to maximise foreign exchange?

Trying to maximise foreign exchange rates can prove a lot of hard work for very little outcome – unless you are dealing in hundreds of thousands of dollars.

And so finding the best rate to finance spending money for a trip can prove more trouble than it’s worth.

Getting 1c more on your exchange rate only translates to $10 if you are only converting $1000.

But for those who believe that if you look after the pennies, the pounds will look after themselves, then the golden rule is to shop around – don’t just accept the rate your bank is offering you, ring around several outlets.

It’s not so much the exchange rate that you need to be concerned about but rather the commissions and hidden margins.

According to Jim Vrondas, senior manager, corporate business at foreign exchange services group OzForex, there is only one wholesale market exchange rate (the interbank rate) , but then individual providers of foreign currency charge their own margins.

The mark-up can be up to 2 per cent for the more commonly traded currencies but then as much as 5 per cent for the more obscure ones.

You can get foreign exchange from a number of outlets including banks, American Express, Travelex, OzForex, HiFX and Customs House.

There are ways to protect yourself from currency movements by locking in an exchange rate or ordering a currency conversion once a particular rate is reached.

This is more likely to be achieved with a specialist foreign currency group rather than with your regular bank.

Say you had a regular pension payment coming from the UK and wanted certainty of income, then you could lock in a forward exchange contract for 12 months. Of course should the rates then move in your favour, you will miss out as you will be locked in at the exchange rate you established.

Another way to maximise your exchange rate applies if you have a single amount you wanted exchanging then you could put in an order, much as you would when you buy stocks on the sharemarket. When the price is reached, the exchange will be executed.

Vrondas’ advice on maximising exchange rates is to be informed, read daily and weekly commentary, shop around and have an exchange rate in mind.

Matt Comyn, general manager at CommSec, meanwhile makes the observation that foreign exchange is just a lottery but you should keep your eye on fees and commission to make the most of your money.