By: Nom de plume

Currencies Direct – A review for the private investor

November 30, 2016

This post has been provided by a guest.

Currencies Direct is a UK-based currency transfer company that provides private and corporate clients with access to a variety of foreign currency. In contrast to high-street banks, Currencies Direct’s rates are favourable for their clients as a result of lower spreads.

The firm, which is rated 93.2% on MoneyTransferComparison.com review site, has level 1 credit from D&B, and has won multiple industry awards, is mostly focused on the following audiences: expatriates, overseas property investors and small businesses. Currencies also caters to additional audiences like foreign stock traders and investors.

The process is rather simple for UK-based individuals. A prospective client inputs his or her details on the signup form, and the system will automatically approve the account in most instances (unlike global clients who may be required to send scanned documents as bank account and address proofs). After a client application is approved, he or she can get full access to today’s rates through an online system.

As an additional value to the service, each client who is transferring more than £5,000 can speak directly to a certified FX trader. This enables the client to do two important things:

  1. Negotiate the rates with his dealer. In some cases, Currencies Direct will be able to offer better rates than the ones the client sees on CurrenciesDirect.com. This information is quite unique to this Currencies Direct review, as the company doesn’t admit that openly (the fact prices are negotiable is not highlighted on the company’s website).
  2. A dealer would be able to offer market commentary and guide each client on the best timing to conduct the necessary transactions. As the foreign exchange markets are volatile, this service can potentially save more money than the currency rates which are offered. Also, you can buy hedging derivatives through the dealer.

The derivatives offered are Forward Contract, Put Option, Call Option and Time Option. They prove to be an extremely useful array of tools for investors, as they can help investors who are interested in tapping into foreign markets to neutralise the impact of currency fluctuations.

An example of how it works – Gentleman Joe from London is interested in investing his savings into the booming USA market, and he is looking to cherry pick several particular stocks he fancies. He needs to buy these stocks in US dollars, so he uses Currencies Direct to move the money to his trading brokerage. Then, he wants to mitigate the inherited risk of currency exchange. His best option to hedge and even possibly gain is through buying put options. He doesn’t have to run sophisticated calculations on which option, which strike price and date – the dealer does all of that on his behalf, and all he needs is to sign it off. This way, if the stocks that were picked gained, but the dollar depreciated against the pound, the put option will come into place and compensate the investor for the GBPUSD increase. If the stocks gained, and the dollar also gained against the pound, the investor will earn money on both counts (while, of course, losing on the premium paid for the options that were not executed).

In summary, private investors can benefit from dealing with a currency exchange company like Currencies Direct, both to minimize the spreads paid on foreign currency buying, and as an affordable, easy way to access the fx derivatives market, without having to personally master this complex area.

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