The crucial point for expats, who often have a high foreign exchange exposure, is not to try to predict movements in the currency markets, but to manage their currency risk instead.
(PRWEB UK) 7 May 2013
• Research shows growing number of UK expats are moving their savings out of Sterling into local currencies.
- UK expats are taking advantage of higher central bank base rates in Australia, New Zealand, and South Africa.
- Over the last six months, Sterling has fallen approximately 10 per cent against the Euro.
The latest research carried out by Lloyds TSB International has shown that more British expats are choosing to transfer their savings out of Pound Sterling and into local currencies. In September 20112, 26 per cent of UK expats living in other countries had the majority of their savings in the British Pound, but this has now dropped to just 13 percent.
For 73 percent of British expatriates, the majority of their savings are held in the local currency of their new country of residence, with the research showing that a further 3 percent have their savings mostly in an additional currency.
In countries where base interest rates tend to be considerably higher than in the UK , such as Australia, New Zealand and South Africa, UK expats are favouring local currencies the most. In the Eurozone, which has a base rate similar to the UK – a rate which has dropped from one per cent to 0.75 per cent recently - expats have also been shifting some of their savings from Sterling to Euros.
An increase of 2 percent has been recorded over the last year in the proportion of expats in France who hold nearly all their savings in Euros, jumping from 19 per cent to 21 per cent, whilst the figure has risen from 23 per cent to 25 per cent in Spain. Back in August 2012, when the Euro rose around 10 per cent against the Pound due to fading confidence in the British currency, any expats choosing to transfer savings held in Sterling into Euros would have benefited.
Senior Economics Adviser at Lloyds TSB International, Andrew Pipe, said: “The current Sterling weakness versus the Euro is primarily due to returning confidence in the single currency rather than a view that the UK outlook is poor,”
“Between mid-2011 and mid-2012, the risk that the Eurozone could break up increased significantly, giving a strong incentive for expats and investors to park currency in Sterling and protect themselves against redenomination risk. Following the ECB commitment to do whatever it takes to ensure the survival of the Euro, this risk has dropped and consequently money has started to flow back out from Sterling into the Euro.
“Longer term, although the UK has significant challenges in returning to sustainable economic growth and securing a stable outlook for public finances, the Eurozone arguably faces bigger challenges still. Over the longer-term, I’d expected Sterling to regain some of its recent lost ground against the Euro.”
Richard Musty, the Director of Lloyds TSB International Private Bank, also gave his view on the situation, saying, “Expats who sell Sterling as a matter of course, such as those receiving a UK pension that they transfer into their local currency, will be out of pocket as a result of Sterling weakness. While those buying Sterling, for example when they pay UK bills or a mortgage in Britain, will benefit from a weak Pound.
“The crucial point for expats, who often have a high foreign exchange exposure, is not to try to predict movements in the currency markets, but to manage their currency risk instead. They should think about which currency they are likely to need their savings in for the long term and then consider moving a sensible portion of their money into that currency thereby reducing their exposure to the foreign exchange markets. Planning ahead is the key.”
In an effort to make sending money internationally easier for UK expats, Lloyds TSB International allows its customers to take advantage of fee-free money transfers3,, in addition to publishing helpful information and guidance on international money transfers at lloydstsb-offshore.com.
To find out how much they could save by using fee-free international transfers with Lloyds TSB International, expats and pre-move expats also visit http://www.lloydstsbexpat.com.