How to safeguard your business money transfer from volatility

By Katherine O'Chee ·
Business woman sending packages overseas

It’s been a turbulent year for the Aussie dollar. Back in March, the AUD crashed to a 17-year low of 55 US cents before rebounding to 71 US cents last week.

And this period of volatility isn’t expected to end any time soon, as headwinds such as escalating US-China tensions and spikes in COVID-19 infection threaten to hamper the AUD’s strong position.

So as a business paying overseas suppliers or contractors, you may be wondering: what are my best international money transfer (IMT) moves in these times of volatility? 

TorFX’s managing director, Nigel Fox says it could partly come down to waiting for opportune moments to make your transfer.

“Exchange rates are always moving, with some currency pairs fluctuating by as much as five percent in a matter of weeks,” he says.

“Subsequently, timing is everything when it comes to securing the right rate for your international money transfers. Picking the wrong time to move your money could prove costly and eat into potential profit.” 

To illustrate this, let’s compare AUD/USD exchange rates on two different days.

The mid-market rate right now is 0.71171, whereas it was 0.70229 on 21 July 2020.* That’s a difference of 0.00942 which may look minuscule, but for an AU$10,000 transfer, you could save US$94.20 just by trading today instead of two weeks ago.

Best IMT moves if you can’t afford to wait

As a business, you won’t always have the luxury of playing the waiting game. For example, international payments to suppliers and employees are generally regular and come with deadlines. So what do you do even if the timing isn’t tipped in your favour? 

Firstly, it pays to shop around for a competitive exchange rate, no matter what the market is doing. That means casting your net wider than the banks and considering online IMT specialist options too. 

In fact, for a transfer of AU$10,000, you could save US$288 by opting for the average IMT specialist exchange rate rather than the average big 4 bank rate.**

Fox says a range of tools and services could also help you snag the best money transfer deal for your business. 

One key feature to consider here is the forward contract

“With a forward contract you can take advantage of a favourable rate by fixing it up to two years in advance of making a transfer,” Fox says. 

Not only will a forward contract protect your transfer from any negative shifts, but as Fox explains, “you’ll also know exactly how much your transfer will be worth, allowing you to budget effectively.” 

The one potential risk is rates getting even better down the line, so you’ll need to weigh this up before locking in a deal. 

But the good news is that although no one knows what the future holds, you can easily access expert currency market predictions and make more informed decisions based on that. A number of IMT specialists like TorFX and OFX regularly publish their forecasts online, so all you’ll need to do is subscribe to their updates with your email for free and have those insights delivered straight to your inbox.

Other business money transfer tools

But it doesn’t stop there. Depending on your business situation, here are a few other IMT features to safeguard your profits from foreign exchange volatility:

  • Rate alert: This would suit a business that has a target exchange rate in mind but doesn’t yet want to commit to a transfer. As its name suggests, a rate alert allows you to set a desired rate and you’ll receive a ping via text or email once that rate has been hit. You usually won’t even have to open an account with the IMT provider to use this function. Just bear in mind that because the currency market can fluctuate quite rapidly, the rate might have changed by the time you sign up and confirm the transaction.
  • Limit order: Similar to a rate alert, this feature lets you set a target rate above the current offer. The difference is, if your desired rate is hit, your provider will automatically make the transfer for you and you won’t be able to back out of the deal. So it’s a better match for businesses who know they absolutely want to go through with the transaction.
  • Stop loss order: Conversely, this feature allows you to set the worst case exchange rate, so that your transfer is instead triggered when the rate falls below a certain threshold. This is worth considering if you want to protect your revenue from any dramatic declines.

Not sure which tools are best for your business? Whether this is your first time transferring money overseas or you’re just keen for a second opinion, discussing your circumstances with a specialist IMT provider could be immensely helpful. 

“They’ll help you identify your exposure, explore your options for mitigating risk and implement the risk management strategy that’s right for your business,” says Fox.

For a list of IMT specialists and their exchange rate offers, head over to our business money transfers comparison table.

*Data drawn from the XE Currency Converter, comparing the mid-market exchange rate at 10am on 4 August 2020 with the mid-market rate at 10am on 21 July 2020.

**Mozo data, as of 12.35pm, 3 August 2020

Katherine O'Chee
Katherine O'Chee
Money writer

Katherine O’Chee is Mozo’s international money transfer and forex expert and business banking writer. She keeps Mozo’s readers on top of the latest news and writes in-depth features to inform and help Australians make smarter financial decisions. Her work has been published in major media outlets including Sydney Morning Herald, SBS News and Bangkok Post. She has a Bachelor of Arts (Media and Communications) from the University of Sydney.