Protect against currency fluctuations during international property transactions

The value of the South African rand this year has seen foreign investors contemplating a move to the rainbow nation to leverage affordable property opportunities.

Although the currency market has fluctuated during elevated global economic crises, the good news is that there are solutions to meet investors’ needs.

ZAR projections in 2020

While the rand as an emerging market currency sustains frequent exchange rate fluctuations, the coronavirus pandemic has infused further volatility into the financial markets this year.

Leading Economic Advisor Dr Roelof Botha in his review of August’s currency movements for Currencies Direct comments:

‘South Africa’s currency continued in its volatile ways during August, but ended the month almost one percent stronger against the US dollar than on 31 July. This gain was not matched by the rand’s performance against other major currencies, with losses against the Euro, the British pound and the Chinese yuan.

‘The volatility was quite pronounced during August, with a depreciation of 5.4% against the dollar between 31 July and 11 August. A combination of dollar weakness and positive market sentiment in the wake of a significant easing of lockdown regulations then led to a pronounced recovery of 6.6% until the end of August.

‘There is the potential for more dramatic movement in ZAR exchange rates in the immediate future as well, with the likelihood of additional rate cuts from the South African Reserve Bank (SARB), and growing evidence of a second wave of global coronavirus infections stoking volatility.’

How currency fluctuations impact property purchases

With this in mind it’s important to note that shifts in the ZAR exchange rate during the process of purchasing a property could have a significant impact on your costs. Fortunately, there are steps you can take to help minimise your exposure to currency volatility, using the services of Currencies Direct, Pam Golding Properties preferred partner.

Protect your property purchase with Currencies Direct South Africa

Their experienced currency experts will keep you up to date with the latest market movements – which is essential if you want to move your money at the optimal time. During periods of heightened uncertainty currency pairs can fluctuate by 20% in days, but the team at Currencies Direct will give you all the insights you need to make an informed decision. They also offer a range of services to help ensure you get the best value on your transfers.

A Forward Exchange Contract locks in the exchange rate for a set period of time, protecting you against adverse currency movements. With a small deposit, Currencies Direct will hold the exchange rate for up to six months, giving you peace of mind that the value of your transfer won’t change between making an offer and completing your property transfer.

If you are only starting your property search and have time to wait for a more favourable rate then you can make use of a Limit Order. If you advise your target exchange rate, then Currencies Direct will make the transfer for you as soon as that rate is achieved.

If you need to make a transfer immediately, whether it be to cover legal fees or some other unexpected cost, they also offer Spot Transfers. Agree your exchange rate, send the funds and they’ll make sure the funds are in your account within 48 hours.

If you’d like to find out more about safeguarding international payments from currency volatility please get in touch with the Currencies Direct team on infosa@currenciesdirect.com or call +27 (0) 21 418 0105.

Posted by The Know - Pam Golding Properties