If you’ve needed to buy or sell currency, you might have wondered why exchange rates differ daily. We’re here to help you understand why a market movement occurs and what it means for your exchange rate, so you know how to secure a great rate for your currency transfers.
Market Movements and Your Overseas Currency Transfer
There are many reasons your exchange rate might move, but in general, there are some core factors to keep in mind when you’re moving money overseas.
Economic Data
Each country produces data, which is used to determine how well the economy is performing. Some countries report data more regularly than others, but some key statistics are generally expected to create more dramatic movements. These could be growth figures, inflation numbers, or employment readings, such as the US Non-Farm Payrolls data.
These statistics impact your exchange rate as they give insight into how well a country is performing. As an example, the US might produce strong growth figures month on month, and that could solidify to currency traders that the country is performing well. As a result, the US Dollar might rise as it’s seen as a wise investment in a healthy economy. However, if the US growth number was predicted to be strong but takes markets by surprise, registering a lower number, this could mean that the dollar is a less favorable asset to hold in comparison to others. As a result, its value might depreciate. These currency movements can sometimes happen very quickly as markets digest the news.
Regional or Global Events
The US dollar, alongside the Swiss franc, is often seen as a “safe haven” currency. These safe-haven currencies tend to strengthen during times of uncertainty or lower risk appetite in the market as they’re expected to maintain their value. This is particularly evident when major global or regional-specific events create uncertainty. These could be anything from an unexpected natural disaster to a planned political election. Any event that might disrupt how a country functions can create doubt and weaken its native currency significantly.
Interest Rates
Interest rates impact a currency’s value, as any move by a central bank to increase an interest rate means more returns for currency traders. For example, if the US Federal Reserve hiked rates—particularly if it took the market by surprise—the US Dollar could strengthen. For you, that means that if you paid for your currency transfer in US dollars, you would likely be able to buy more of the currency you require for less of your dollars.
On the flip side, if the Federal Reserve were to cut rates, the dollar’s value might decline, meaning the amount of currency you could buy for your international money transfer might not be as much as before the interest rate development. Central bank developments for the country of the currency you’re buying also need to be considered. If you wanted to buy Euros, and the European Central Bank hiked interest rates, the EUR/USD exchange rate may also strengthen.
Commodity Prices
Some currencies are heavily influenced by commodity prices, too. For instance, the Canadian dollar can track the price of oil higher or lower, and the Australian dollar might feel the influence of iron ore or gold price changes. It’s worth speaking to your currency broker about what factors could influence your chosen currency.
How do You Move Money Overseas and Navigate Currency Market Volatility?
At Evolve Currency Management, we know you’ll want competitive rates so you get more from your foreign exchange transfers.
Our currency specialists are dedicated to helping you—whether you’re moving money for a property purchase, salaries, pensions, or the import or export of goods . We can guide you through the market and help you to make transfers at opportune times for you. You can even talk to us about locking in an exchange rate for up to a year! Reach out to us today to find out how we could help you.