The foreign exchange market is a global decentralized market also known as an over-the-counter market where bank dealers make the market to determine the interbank exchange rate, i.e. the rate the banks use when trading with one another.
The interbank rate is the mid-point between the buy and sell rate for a currency on the open market and is the most accurate rate of exchange at any given time. You can easily check this at any time using the XE Currency Converter.
Unfortunately for most of us, this rate is reserved solely for banks and large financial institutions trading in large amounts of foreign currency.
For retail or business banking customers looking to make smaller international money transfers, a margin (or spread) will be applied to the interbank rate to ensure a profit for the service making the transfer. As a retail banking customer, this margin may be anywhere between ~4-5% of the interbank rate.
The graph below illustrates the rate that a customer may expect to receive from the bank when converting their AUD or NZD to GBP.
What determines whether I receive a competitive rate?
Naturally, when sending money abroad, it’s in your best interests to ensure you keep as much of your money as possible by locking in a favorable rate of exchange.
The exchange rate you receive will be based on a number of factors, including:
- Volume – the amount you are converting
- Currencies exchanged
- Knowledge and awareness
- Frequency of transactions – ongoing or one-off
However, one of the most sure-fire ways to ensure you are receiving a competitive rate is to look at using a money transfer specialist like XE who provides a much sharper rate of exchange than you would otherwise receive from the banks.
Why you should look beyond your bank
XE works closely with our broad network of referring partners to provide their clients with a competitive, secure money transfer solution.
As such, when you choose XE Money Transfer via one of our partners, you will receive preferential rates of exchange that are more competitive than you would receive from other providers.
…It’s not just about the rate
At XE, we pride ourselves on delivering our clients value beyond a great rate, providing a much more comprehensive service than they could expect to receive from the banks.
Exchange rates fluctuate at any given minute and as such our expert team is on hand to be your eyes and ears in the market and advise on how to ensure you lock in the best rate possible.
We also offer a range of products typically not made available to retail banking clients, including Market Orders and Forward Contracts, that will help you reduce your exposure to currency risk.
Whatever your needs or situation, feel free to get in touch with the team at XE to discuss the best approach to your foreign currency needs.