Back in June, immediately following the referendum, the Pound dropped like a stone. When Theresa May announced the dates that Article 50 would be activated at the Conservative Party conference, again the pound dropped like a stone. I personally think on March 31st when Article 50 is activated the Pound is going to drop like a stone.
One of my ambitions is to own some Icelandic horses. At the end of March we’re travelling to Iceland to meet our horse dealer. We’ll spend a week trying different horse, getting to know them before deciding which the buy. Then at the beginning of April we will be handing over something like £10,000 in Icelandic Krona just a week or so after it [the Pound] has probably dropped like a stone!
It really is a realistic possibility that the pound could lose 10%, 15% or 20% of its value literally in the week before I need to buy £10,000 worth of currency. That could cost me maybe £2000.
The way I look at it, there’s almost no chance of the Pound going up in value given the past performance when one of these events happened. When I was in Iceland last July we got 168 kroner to the pound. Before the referendum it was nearer 185. This week we’re getting 139 to the pound. I don’t really want to carry £10,000 worth of krona in cash and I don’t actually know the exact purchase price of the horses. My solution is open to foreign currency account at my bank.
So this is the idea. I open the account that is a native Icelandic Kroner account and leave it empty. Before the Article 50 activation date I would international transfer from my own normal current-account to my own Icelandic Krona account and leave the money in there. So even if the pound does fall in value I already have my krona safely in the bank. With an international transfer you can get near interbank exchange rates with a very small fixed fee for doing the transfer. This will be much cheaper than paying my bank’s normal exchange rate and the additional charge for making a non-sterling transaction.
On Monday, I went into a local branch and enquired about opening the account. It was even more painless than I had expected. I opened the account there and then and as long as I keep more than the equivalent of $2000 in the account there are no fees. As it happens I only intend to use it to this one-off transaction and I can close it again and not pay anything.
If you are having to make regular payments overseas such as student fees, mortgage, household bills for a second home etc. then it is seriously worth your considering opening a foreign currency account and getting around the poor bank rates by using a money transfer service.