- Posted by Jason on March 2, 2015 in Banking Global Economies Global Money Transfer
When exchanging money, it’s always important to get a good exchange rate so that more of your money reaches its destination. Like anything, efficiency is key. We’re going to take a look at factors that impact global exchange rates, as well as different currency forex rates offered by different providers.
What Factors impact currency exchange rates?
High interest rates, used to discourage lending by raising the cost of borrowing, increase demand for a country’s currency because foreign investors find the returns attractive. This makes sense – if you could put money in the bank in the UK% for 2% or NZ for 4%, which would you choose? 4% of course, provided the risks are fairly similar in both cases. But in order to invest money into a NZ bank, you need New Zealand Dollars. The result is an increase in demand for the NZD. Thus, higher interest rates increase the demand for a currency and therefore its price.
An increase in the demand for a country’s exports can also increase currency value. If you want to buy coal from Australia, you will need to pay the seller in their local currency – increasing the demand, and therefore price of the AUD. This is why countries with “strong economies,” that produce many goods and services, have a high currency exchange rate.
Inflation is also an important factor in currency value. High inflation, which erodes the value of money, often scares away investors and therefore decreases demand for a particular currency. This leads to a lower exchange rate.
New Zealand’s currency has been high in recent years arguably because of high interest rates (compared to the rest of the world at least, much of which has been engaged in “quantitative easing”), good investment opportunities, low inflation, saleable exports (although milk products have rapidly dropped in price recently), and a stable nature.
It’s important to remember that a high currency isn’t all good. It helps importers, but exporters – particularly in the agricultural area, are praying for a decrease in the dollar.
Forex Currency Rates Between Providers
It’s important to remember that all remittance and currency exchange providers will charge you a slightly different (or sometimes very different!) rate to convert your money. Some companies, such as Paypal, have poor exchange rates and require you to create an account and log in before you can calculate their rates, but offer a speedy, easy service as a compromise. (Although they don’t transfer bank to bank, and getting money from Paypal to a real bank account can take a long time).
Other companies, such as TransferWise, offer good exchange rates, but high fees on some transactions, charging 0.5% of the total amount sent. If moving a large amount of money, 0.5% can add up very quickly, and often compensates the provider for their lower exchange rates. It’s important to check both the exchange rate AND the fees when considering providers.
OrbitRemit publishes accurate information regarding fees and exchange rates up front, so you can calculate the entire cost of the transaction before you actually commit to anything. OrbitRemit has a money transfer calculator on the top right hand side of the screen to save you hassle and only charges around $4 to $8 NZD to make a transfer, regardless of size.
You can now easily transfer money internationally with OrbitRemit!
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