4 July 2008
When purchasing products abroad, the foreign exchange rate can significantly alter the price of the goods. World First can help in two ways:
A Scottish-based organic company bought a consignment of organic vegetables from Italy that cost €275,000 on the 11th November 2006. They needed to make an immediate transaction (know as a "spot" transaction) to purchase the goods. They initially sourced an exchange rate from their bank and then compared it to an exchange rate they obtained from World First:
| Retail Bank | World First | |
|---|---|---|
| Exchange Rate | 1.4717 | 1.4881 |
| Transfer Fee | £21 | £0 |
| Total Cost | £186,880 | £184,799 |
| Total Saving | £2,081 |
A London-based furniture import company agreed to buy 6 containers of furniture in April 2005 from Hong Kong that cost $285,000 with payment due on the 8th July. Between the 20th April and the 8th July 2005, the sterling to dollar exchange rate moved from 1.9190 down to 1.7308.
When the company agreed to buy the containers, the cost using the exchange rate in April was: £148,515. If they had waited until July and used the exchange rate then, the cost would have risen to: £164,664, an increase of over £16,149.
In fact, Mr Jones, entered into a "Forward Contract" with World First, which enabled him to fix the exchange for his August transaction in June.
| Dollars | Pounds | |
|---|---|---|
| Cost of containers (April exchange rate) | $285,000 | £148,515 |
| Cost of containers (July exchange rate) | $285,000 | £164,664 |
| Cost of containers (July rate "forward contract" fixed in June) | $285,000 | £149,000 |
