Anyone thinking of buying an overseas property will know that currency fluctuations can be extremely volatile, making transferring large sums of money very stressful.
From when you initially make an offer on a property to the time of completion, the exchange rate can swing significantly, making that home considerably more expensive than you had budgeted for. This has certainly been the case in recent times against most major currencies.
Over the past couple of years the pound has had a particularly turbulent time trading against the Dollar, Euro and Shekel, weakening to nearly all-time lows.
I believe there are four main factors that have major effects on rates and I call it the "currency compass". The two main contributing factors are economic data and the political stability of a country.
The release of economic data such as interest rate decisions and employment figures can have an enormous effect on a currency pair. We saw this earlier this year in the UK - when a country is in the midst of a General Election it tends to be at its most unstable politically. It only takes one comment from an MP to send exchange rates spiralling out of control.
The two other points on the compass are unforeseen circumstances such as earthquakes and acts of terrorism. There is little that can be done about these, except perhaps avoiding a knee-jerk reaction, as often currencies fall sharply before rising again in the immediate aftermath of such events.
Despite the economic problems the UK is facing, there have been opportunities to capitalise on gains.
Over the past year, the pound has had a high-low swing of more than 15 per cent against the Shekel and Dollar. In real terms if you were exchanging £200,000 at the high point you would have gained an extra NIS 200,380 and $52,980 respectively (approximately £33,000).
What can you do to protect yourself and get maximum bang for your buck if you regularly transfer money?
One of the most popular currency tools os the forward contract.
This is where you can secure a rate for up to two years in advance, which means you are protected from any adverse currency movements.
You can place this order at the time you need to put a deposit down on a property. This may be the best solution to give you peace of mind on your currency exchange in such volatile times.