The Australian dollar (AUD) plummeted against Pound Sterling (GBP) in August as risky carry trades were unwound. A carry trade is where an investor typically borrows in a currency where costs to borrow are low (such as Japan with interest rates at 0.5%) to invest in higher yielding assets (such as the Australian Dollar where interest rates are at 6.50%) to make money on the difference in interest rates. As more and more money was lost in global equity markets, more and more carry trades were unwound in order to regain some profit and minimise any further potential losses. This meant that the Australian Dollar weakened aggressively overnight against all major currencies.
On Wednesday morning (15th of August) GBP/AUD was trading at 2.3894, when we awoke on the Thursday morning (16th of August) the market was trading at 2.5328 a difference of 14 cents or 6% over night. This trend continued through out Friday (17th of August) where GBP/AUD peaked at 2.5637. This in total was a unprecedented movement, a total of 17 cents or 7% in three days. To put this into perspective if you were a migrant transferring GBP100,000 on the 15th of August you would have been able to buy you AUD238,940. The following day the same GBP100,000 would of bought you AUD253,280, and by the 17th AUD256,370. A difference of AUD17,430 in only three days.
These levels did not stick around to long and when we returned from the weekend the AUD had gained on GBP and the market was trading at 2.4658. When markets are like this, time and advice is paramount. At HIFX, a globally recognised currency broker, there is a dedicated Migration team who can cater for all your currency requirements when you migrate. Superior exchange rates and free transfers are guaranteed, but the information the assigned FX dealer’s provide to registered clients is often the difference between thousands of AUD depending when you trade.
A sensible strategy for someone migrating to Australia when levels are this high would be to secure as much of the currency needed straight away – thus fixing the cost at the outset. If all the funds are not available, the exchange rate can still be secured by purchasing one or more "forward contracts". This involves putting down a 10% deposit to secure the current rate of exchange which can then be held for up to two years, at which point the balance (the remaining 90%) needs to be settled. This way of buying currency is flexible and can accommodate changes in the time scale originally agreed, as well as protecting you from any downward movements in the market place.
There are many strategies available to minimise your risk when transferring funds, all of which will be explained clearly by your personalised dealer should you open a trading facility with HIFX. To discuss your requirements in more detail and for a free currency consultation please contact the Migration Team at HIFX plc on 01753 859 159 or by emailing us at