Currency exchanges happen all the time and every banking business day. If you are going to travel to Europe and have US dollars then you may need your dollars exchanged into German Marks. What about the internet broker deals where the exchange is at a discount? Is it for real or not? Currency exchanges at a discount, like 15/10 or a fifteen percent discount happen in very rare instances where the client “losing” money on the exchange needs fast action to the other currency and is willing to lose some in return. On the other hand, the chance of this happening in the broker community is miniscule or nil.
Why do you see so many currency deals on the internet today? Two reasons, ignorance and greed. The currency deals you see within the realm of the internet or your “in-box” are for the “hope” to make a lot of money on the “currency swap” from brokers. Brokers are ignorant to the fact that their chance of ever doing a discounted currency transaction is nil by the reason someone told someone they are doing currency transactions all of the time. They will mention names such as, the Treasury Department, the Feds, or some “group” which needs to have Euros instead of Dollars. The reality is more myth than fact and defies common sense.
Here are the numbers for your review:
Client A has 100 million dollars and would like to have the currency exchanged into Euros.
Client A has a somebody that will exchange the currency for the “broker” 15/10 or fifteen percent discount.
Client A, according to the brokers, would like to have the Euros, even though the Client loses money.
As of the 1st of August, 2011 the exchange rate is one US dollar to .70 Euros, therefore Client A will have the equivalent of 85 million Dollars except it will be in Euros which is 59.9 million Euros after the currency exchange, or to state, Client A will lose fifteen million dollars.
If you were Client A, would you do it? Does it make sense to lose money on behalf brokers and other that believe you can do currency exchanges with 15 percent discounts all the time?
Welcome to Zero Discounted Currency Exchanges.
Real currency exchanges take place within the private banking realm and the client never loses any money. Using the example above, Client A with 100 million dollars will have 70 million Euros instead of 59.9 Euros. As stated before, would you, as Client A rather have 70 million Euros or 59.9 million Euros at the end of the day?
Now a surprise to the brokers which claim to have done numerous currency exchanges. How do you think you will be paid if there is a zero discount currency swap?
In summary, Client A really doesn't need a broker, but if there is a broker on the horizon, it is in the best interest of the broker to take care of their client and make sure Client A does not lose money. So you have to ask yourself, are you in business to help your clients? Or are you in business to line your pockets with the mystical, discounted currency swap which will hurt your client?
And we ask the brokers again, “How do you think you will be paid for a zero discounted currency exchange?”
For more information please revert to Commodity Trading
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