Foreign exchange (FX) is the most liquid market in the world, with continuous buying and selling of currencies. For anyone transferring money from one country to another, or perhaps simply buying currency for a holiday in another country, the foreign currency exchange rate will either make you smile or frown. And for those who send regular remittances to their home country to support their loved ones, there is an added economic necessity to achieve the most favourable foreign currency exchange.
The UK is estimated to be the world’s fourth largest sender of remittances, and is among the top 10 senders to developing countries. According to the comparison site Finder, the UK consistently sends around US$20 billion abroad every year through international money transfers, with Nigeria receiving more money from the UK than any other country, accounting for 15.4% of all transfers abroad. Next is India (14.7%), France (6.7%), Pakistan (6.3%) and Germany (4.7%).
Weakening Currency
A weak currency translates to a drop in remittance values compared with other currencies, and possibly lower transfer volumes as remitters wait for rates to change in their favour. Because countries in Africa, Europe and the Indian sub-continent receive large inward flows from the UK, the changing value of the UK pound is always a key concern for foreign nationals who are paid in sterling. They will want their hard-earned money to achieve the highest value when making a transfer, whether it be pounds to Indian rupees (INR) or pounds to Nigerian naira (NGN), euros or other currencies.
Market Forces and the Pound’s Performance
The currency exchange rate can rise or fall quite suddenly for a variety of reasons, so gaining the best rates when sending money abroad can be tricky when the rate is moving from minute to minute. Fluctuations can make a big difference to the amount that is received when the money has been transferred into the destination currency.
Some of the factors affecting a currency’s performance include the release of fresh economic data, announcements from central banks, geopolitical events/stability, inflation rates, a country’s balance of payments, and movements in bank base rates.
The pound has certainly experienced some big fluctuations recently. Since the UK voted to leave the European Union in 2016, the pound has been affected by uncertainty over Brexit. 2019 has so far proved to be a particularly volatile year for the pound as it has been affected by economic and political pressures. One thing is certain: there will be continuing uncertainty until the UK’s position with Europe is resolved one way or another after 31 October 2019.
The Impact on Different Remittance Corridors
The effect of the fluctuating pound will vary from corridor to corridor. Looking at the figures from Exchange Rates UK, a site that provides the latest exchange rate news and historical data, we can see how the pound has performed over the last 180 days across some of the most popular corridors.
Let’s begin with India, one of the top remittance destinations for the pound. The data shows that the average value of the Indian rupee against the pound was 89.814 INR between 13/02/2019 and 10/08/2019. The highest value was 94.814 INR (27 Feb 2019), and the lowest value was 83.708 INR (30 Jul 2019).
Nigeria, another popular destination, showed an average currency exchange rate of 459.18 for the Nigerian naira (NGN) over the same 180-day period. The highpoint was 481.79 NGN (27 Feb 2019), while the lowest figure was 388.89 NGN (5 Jun 2019).
To take one other example from Africa, the average currency exchange rate for the Kenyan shilling (KES) was 129.98 over this period. The highest value was 133.81 KES (19 March), and the lowest value was 124.12 KES (11 August).
How To Get The Best Exchange Rate
The problem with any foreign currency exchange is that you have no control over the factors that affect rate changes. However, even if you can’t control all the variables that influence exchange rates on the global stage, you do have some control over the actual price you pay for turning your pounds into another currency.
The first step is to shop around and keep a close eye on the latest exchange rates. When you send money overseas, whether via a bank, a forex broker or an international money transfer organisation, the rate you pay will vary. There is often a difference between the market rate and the rate you pay as a result of mark-ups on the FX spreads. Sometimes this is a hidden charge and while some providers waive the transfer fee, you may pay a heavy price on the foreign exchange rate. Look for tighter FX spreads, and try to get as close to the market rate as possible.
Why Xpress Money Makes Your Pounds Go Further
At Xpress Money, we aim to get the best value for your currency exchange rate. There are no hidden charges or high mark ups. Whether you are transferring pounds to India, Pakistan, Bangladesh, Nigeria or Kenya, you can be sure of two things: wide network of locations for your loved ones to receive cash and ease in checking the rates with Xpress Money’s currency calculator
If you are sending pounds to Africa or anywhere else in the world, you have a wider variety of transfer channels to choose from. Find out how Xpress Money can make your money go further.
