HSBC: How To Utilize The Foreign Exchange
[Advice column by HSBC Bermuda]
My child is starting university soon and I’ll need to pay for his living expenses and tuition in Canadian dollars. How can I ensure that I get the best possible foreign exchange rate and what are some of the key risks I should consider?
Start with the end in mind. Use today’s Bermuda dollar [BMD] to Canadian dollars [CAD] foreign exchange rate to calculate how many Bermuda dollars you will need to purchase your required amount of Canadian dollars. Don’t forget to add the Bermuda Government Foreign Currency Purchase Tax [FCPT] as this will increase the amount of Bermuda dollars required.
Foreign Exchange Risk
One of the key risks you will be exposed to is foreign exchange risk. When you are preparing to exchange your Bermuda dollars you can expect the CAD foreign exchange rate to move up and down on the international market. As a result of this exchange rate movement, you may need more or less Bermuda dollars to purchase your Canadian dollars.
Getting the best rates
To get the best rates, start by researching the historical movement of the BMD-CAD exchange rate to get an idea of how these currencies change versus one another. For example, in October 2013, the rate was 1:1 where you could have exchanged one Bermuda dollar for one Canadian dollar.
However, in March 2015 the BMD-CAD rate reached 1.25 which meant that for every Bermuda dollar exchanged you got 1.25 Canadian dollars.** By monitoring the rate on an ongoing basis you can determine the best time to purchase CAD.
Typically you can monitor the current exchange rate through your bank. HSBC customers can log onto Personal Internet Banking and click on “Rates Inquiry” on the menu. There, you will be able to view current rates and also access a currency calculator.
The currency calculator will provide you with an indication of how much Bermuda dollars are worth in Canadian dollars at the current exchange rate. The calculator does not account for the FCPT. This tax will impact your final cost to purchase foreign currency.
Contact your bank
You may wish to speak with your bank about opening a Canadian dollar savings account***. This will allow you to purchase and save Canadian dollars when the rate is favourable.
To learn more about foreign exchange and the range of foreign currency accounts that HSBC offers visit www.hsbc.bm/foreignexchange
***Canadian dollar accounts
At HSBC, we can assist in opening a Canadian dollar account in Bermuda or at the HSBC nearest to your child’s university. If you are an existing customer you can open a Canadian dollar account with HSBC Bermuda in Personal Internet Banking.
HSBC Premier and Advance clients are able to manage and transfer money between all of their HSBC accounts worldwide using Global View and Global Transfer. It is accessible on Personal Internet Banking and Mobile Banking.
Global View and Global Transfer benefits:
- Money transfer service are fully automated and available 24 hours a day, 7 days a week
- Transfers are immediate or on the same day between eligible HSBC accounts
- Preferential rates on Foreign Exchange transactions for HSBC Premier clients
- Generous single transfer limit allows you to transfer larger amounts between your eligible accounts and benefit from our best rates
- You can currently transfer over 20 foreign currencies
*The US dollar is equal to the Bermuda Dollar. ** Past performance is not an indication of future performance as market rates fluctuate. Issued by HSBC Bank Bermuda Limited which is licensed to conduct Banking and Investment Business by the Bermuda Monetary Authority.
