Anyone used this currency exhange?

[Vizeman]

Just wondering if anyone can vouch for this curency exchange site
http://www.crowncurrencyexchange.com/content/us-dollars.asp
They've got an offer on today that seems too good to be true. I'm a little dubious sending them money when I don't get anything in return until June 2007.
I guess they must invest your money until that time and then buy currency am I correct?

 

[Camac]

I have had two quotes from this company for dollar exchange for our trip in December over the last few months but have not taken the plunge. Although I am sure I read a thread from someone who has used them and was very happy.

I think it works along the lines of they quote you an exchange rate then you must transfer the funds to them within two days of the quote. This ensures your rate of exchange even if you do not travel until next June.

I know they are quoting $2 to the £1 for June 07 at the moment but you need to calculate the lost interest you will incurr in no longer having the funds in your account - would the interest you gain over the next 9 months or so be worth a lesser exchange rate? If we knew the answer we would all be currency traders.

Hope this helps.

 

[Miffy2003]

Also, factor in the potential risk. I'm sure it would be absolutely fine - but if they were to go into administration you would be likely to get no money at all.

 

[pauldolling]

Also, factor in the potential risk. I'm sure it would be absolutely fine - but if they were to go into administration you would be likely to get no money at all.

Very true

 

[Boss Hogg]

I guess they must invest your money until that time and then buy currency am I correct?

Effectively yes, albeit it is not quite that simple.
They buy the currency, and then whether they are able to offer a premium on "today's" rate would depend on the interest they can receive on the money when compared to sterling deposits over the period.

Hope that makes sense!

 

[UKDEB]

I guess they must invest your money until that time and then buy currency am I correct?

Almost. They will enter into a forward exchange contract (in simple terms, an agreement to buy a commodity - in this case currency - at a fixed price at a future date). They take your money today and invest it. They then buy the currency at the agreed (fixed, remember) rate at the future date. No risk, just profit for them.

As an individual, you could enter into a forward exchange contract in the same way and fix your price now, but not pay until the future date. Of course, the rate you will get on your £500 holiday spending money will be nothing like that Crown can get on its bulk funds.

In either case (doing it through Crown, or doing it yourself), what you need to understand about a forward exchange contract is that what you are doing is eliminating the risk of the rate moving against you. What you can't do is guarantee it might not move in your favour. It's not about gambling, it's about certainty. In the context of holiday money it's insignificant, but if you are a businessman dealing in thousands, hundreds of thousands or even millions, it enables you to set your prices knowing that exchange rate movements can't wipe out your profits. If you contract to manufacture a product today at £X, you will not receive payment until you deliver your goods (or, most likely, 30, 60 or 90 days after delivery). If you don't hedge against exchange rate movements, your profit could be obliterated.

It's a very simple premise that can be surprisingly difficult to grasp.

 

[Vizeman]

Geez you guys are smart
I think I may hang on to my money for a while get a little interest on it hoping that the rate doesn't drop a lot!
Thanks peeps