If you hear the word ‘market’ and think of a street full of stalls then the foreign exchange market might be a bit of a surprise. But, if you’re sending money abroad, knowing about it could cost or save you a lot of money.
The foreign exchange market (sometimes called the FX, forex or currency market) is an international network of people, banks and businesses trading different currencies. It takes place all over the world and, because it’s international, the market hardly ever sleeps.
How Did it Start?
The modern foreign exchange market began in the 1970s. After World War 2, the US, UK, Canada, Australia, Japan and much of Western Europe entered into an agreement to fix the value of their currencies to gold. The idea was to provide them all with stable currencies, that would hardly change in value, so that the war-damaged countries could rebuild without worrying about the strength of their economies.
Just over a decade later, responding to a whole lot of changes in the world economy, the countries in the agreement began to switch from ‘fixed exchange rates’ to ‘floating exchange rates’. This meant they could trade their currencies for others, with banks, companies and individuals, and the values would be set by how many were being traded and for what price at any given moment.
Why Should It Matter to You?
Since its introduction in the 1970s, the FX market has become one of the most traded financial markets in the world. Billions of pounds, euros, roubles and yen change hands every day, keeping the value of every currency constantly changing.
When you’re sending money from one country (and currency) to another, you’re playing a small part in the foreign exchange market. You’re trading the currency you have for the one your recipient will receive.
The two currencies work together as a ratio and are often written as a ‘pair’, like this: GBP/EUR. They will usually be followed by a number, which shows how many of the second currency (the ‘quote’) you need to trade to get 1 unit of the first currency (the ‘base’). So if you see GBP/EUR = 1.14 that means you need to trade €1.14 to get £1.00.
How We Can Help
The foreign exchange market constantly fluctuating means you end up losing out when you transfer money if the value of a currency changes.
We know that when you’re sending money home, whether it’s for bills, savings or a gift for friends and family, you want to be sure that the amount that you send is the amount that arrives. That’s why, with TransferGo, the exchange rate freezes when you click ‘Send Money’ (you’ll see it in the Transfer Summary box on the right hand side).
We want to make transferring money easier, so we’ve taken the uncertainty out of exchange rates. If the value of the currencies changes once you’ve started putting in the details of your transfer or once you’re actually paying into our local account, we pay the difference, not you. So as soon as you see an exchange rate quoted on our site, that’s the rate you’ll get. Guaranteed.
Even though the foreign exchange market rarely sleeps, with TransferGo you can be sure that what you see on screen is what you pay. It’s just one of the ways we make sending money, easier, faster and more secure.