New job with option to fix exchange rate for 3 years

RobAnd

Hello, I'm new to the forum.
I have just received a job offer by a European company which will pay me in Swiss Francs.
They have given me the option to keep my salary in Swiss Francs or take a fixed exchange rate for the next 3 years to pounds or euros. The exchange rates offered are the 0% charge (interbank) ones, as of this month.
For info I don't currently have many expenses in pounds and none in euros. And the job will be based outside Europe for 3 years.

My question is which option is best? Any opinions would be gratefully received.
Thanks.

BillJones

RobAnd wrote: »

My question is which option is best? Any opinions would be gratefully received.
Thanks.

Both options have a similar expected value. Getting the money in Swiss, and taking the exchange rate at the time has a slight expected advantage as Swiss forwards are higher than pounds (i.e. a swiss frank buys more pounds in a year than it buys today), but the difference is small. If you were to arrange a forward FX deal then you can agree to buy a pound for about 1.44CHF three years forward, against about 1.51 CHF today.

What is a larger factor is the risk that you'll face. Assuming that you will stay in the UK long-term, then getting any currency other than GBP gives you extra risk. Yes, if CHF goes up you are better off, but if they drop, you are worse off. The option with the least risk is to get the currency which you are paid to match the currency that you'll spend. Fixing the exchange rate today does exactly this, it defines how any pounds you'll be paid in the future.

Edited to say, the above applies if you'll end up in the UK, and are planning to be able to save during the next few years. If you are based somewhere else, and will spend all of your wages living, then it's a different scenario.

And be aware, no-one knows where FX rates are going in the future. That's not what FX forwards tell you.

Derwent

If you are going to be domiciled in Switzerland and the vast majority of your expenses are going to be paid out in Francs then it is a no brainer to be paid in Swiss Francs really otherwise you will suffer currency fluctuations each month as you change your GBP/Euro into CHF for monthly expenses.

BillJones

Derwent wrote: »

If you are going to be domiciled in Switzerland and the vast majority of your expenses are going to be paid out in Francs.

OP says it's outside Europe. Destination might be useful

RobAnd

Hello, and thanks for the replies.
The job will be based in Africa. Most local expenses will be found by the company. So I won't have much requirement for local currency.

So far they have offered a guarantee of 1.49 CHF to the pound or 1.241 CHF to the Euro, not far from today's rate.

Ending up in the UK in the future is probably unlikely, assuming all goes well.

So I guess the decision is either to bet on the GBP, Euro or the CHF.... over the next 3 years. Maybe there is no right/wrong answer if I have no large expenses in a particular currency, and I am unsure of where I will end up.

Thanks again for your time.