Currency Exchanging NZD-USD-GBP

MisterMee

I have a considerable sum of New Zealand Dollars, i tried to be clever and wait until after the election to trade them into Sterling as like most i was expecting a hung parliament and since then they've lost 7-8% of their value vs Sterling.

The NZ central bank is expected to lower interest rates in July thus the NZD is likely to fall in the short to mid term.

Anyway i don't want to go straight into Sterling as i see it as overvalued against the USD in the short term and Euro mid term so i'm wondering what is the best way to convert into these currencies and get as close to the bank rate as possible.

I've an account with Foreign Currencies Direct but you lose about 1.5% off the bank rate, thus to move the money twice will mean a loss of 3%.

Any suggestions appreciated.

bowlhead99

So just to clarify, you were trying to be clever and expected something to happen with rates after a particular event, gambled on it, and lost a significant percentage.

Now you think there is another particular set of rate changes in the pipeline (GBP vs EUR, GBP vs US, NZD vs all three of them) so you are looking to gamble on that too, and hope that your forecast of "seeing sterling as overvalued" is right this time for a change.

And you are so certain that it is going to happen that you're willing to pay extra fx costs to move the money over to those "third currencies" and incur round trip fx translation fees to go into and out of those currencies on the way back to sterling.

And much of the premise for the move away from NZD is "The NZ central bank is expected to lower interest rates in July". If the market is truly expecting this, presumably there won't be a massive fx shock when it happens because it's already in the price (i.e. is part of the reason why you already lost your 8%)

What could possibly go wrong with your strategy :rotfl:

Still, I appreciate you're probably not here for advice on how to stop being a currency speculator, the irony just made me smile.

While you're UK based you'll find most currency brokers are, perhaps like Foreign Currencies Direct, expecting to buy or sell sterling making you jump along two sides of a triangle to get to the currency you want. If your significant amount of NZD is currently in NZ, you would probably do better with an FX broker there, who could buy you the EUR or USD without triangulating, for under 3%. Presumably you are planning on opening a USD or EUR account to hold the funds, so just get the broker to sent the purchase proceeds to there, but instigate it from the NZ end.

Alternatively, buy your GBP, paying the 1.5% once, and then if you don't think much of sterling prospects, go and buy an investment fund or two from a fund supermarket which holds Euro or USD- denominated equities or bonds. Obviously not risk free, as there is investment risk over and above the currency risk that you're looking for, but if you're a speculator and this transaction is for longer than the short-medium term, it could be viable.

The investment fund(s) would then handle all the conversions to and from the underlying currencies and would be achieving much closer to the mid market rate, thus reducing transaction costs, in some sense, while exposing you to other types of risks of course.

A third alternative is that once you've cashed in your nzds and bought sterling, one of the things you could do with your money rather than keep it in a sterling account or U.S. or Euro account, is use some of it to pay back the debt that you previously skipped out on, per your previous posts. That is not the most practical money-saving solution, but would perhaps be considered moral and proper.

MisterMee

Being as Barclays banks and HSBC have been rigging currency markets and the latter taking billions in drug money from murderous South American drug gangs ...... and with the banking system in the UK having been bailed out by much more than a couple of grand per person (amount i owed) these moral and proper institutions will have to live without the small sum i owed which is now off statute.

£1 buys = 1.409 Euro, US$1.56, NZ$2.14 at time of writing, see if this is such an out there strategy in the coming months.

bowlhead99

Yes I didn't seriously expect you to pay the money back, I guess you'll always be able to find some negative headlines about banks which you can use to justify stealing from them

I do think the strategy of flipping out of NZDs to avoid the currency risk that comes with a market expectation of a fall in interest rates, just so you can buy Euros and take the currency risk that comes with a market expectation of money printing instead, may prove misguided. I can see of course that the Euro isn't exactly at all time high prices at the moment, and have been gradually buying some Euro holiday money in my Euro accounts for a while as I can always use it at some point. I'm just not gambling on throwing a "considerable sum" that well exceeds my future needs, into that currency ; it could still get cheaper.

There may be some short term gains in buying USD at 1.56. But $1.45-$1.65 doesn't feel particularly "cheap" on a purchasing power basis, and doesn't feel very high on paper for those who remember $1.70, $1.90 and, rarely. $2. I have enough dollar currency and dollar shares so am not buying more just for the hellovit at these prices, but that's not to say your trading plan is doomed.

Still, the way you're looking to move the money it seems like you would be paying 3% to buy the dollars, probably 1.5-2% to sell the dollars later to buy pounds, and in the meantime earning only tiny amounts of interest on the cash held in dollars.

If you just want a short term punt on USDGBP because you think the pound is short term overvalued, it would seem far simpler to just get your NZDs back to pounds, put them in a high interest current account or two earning 3-5%, and then place some leveraged spreadbets to speculate on the near quarter or far quarter spot rates for relatively little cash outlay. That would be the way I'd do it, rather than buying a load of physical foreign currency that exceeds my spending needs.

So, seems like you have plenty of options.

J_B

I use http://www.currencyfair.com/ to convert GBP into Euros to transfer to my bank in Cyprus.
Exchange rates are good and fixed rate of £/€3 for transfers

Currently offering €1.4007 for £1

MisterMee

After 8 days the NZD has lost 2.5-3% vs the USD and EUR, should have gone with gut instinct.

londonTiger

forex traders trade in HUGE volumes and they skim tiny amounts from each transaction so they need to be exchanging a lot of money, very regularly. Plus they beenfit from wholesale currency exchange rates. You can't really do this with small one off trades, you'll make small amounts.

Unless of course you can play the long game, like sell pounds into dollars when it was worth $2 ever £1. And then buy back pounds after it hit £$1.60 PER £1.

That would make a healthy profit but it's partially luck.

MisterMee

I was looking to gain back 7-8% and with the huge fluctuations at the moment this didn't seem unrealistic.

Currencyfair seems to charge about 0.4% per transaction.

dunroving

Trying to time currency markets is foolish.

The GBP is currently at a pretty long-term typical rate against the USD so it's not clear why you think GBP is overvalued against USD ... it has rarely been worse than its current rate ($1.53) for any extended period of time in the past 8 years.

Anyway, my first sentence essentially sums up this situation and all others where people ask for advice on what to do since their last currency exchange plan went to pot.

MisterMee

That aside if you look at the OP all i asked for was a way of converting currency with the lowest possible commission.

Best advise a teacher ever taught me when answering an exam question was RTFQ and ATFQ.