Category Investments

Buying forex? Here’s how to limit your exposure to currency volatility

25 October 2021 Standard Bank

Fluctuations in exchange rates can be a menace for anyone purchasing foreign currencies, either for a trip abroad or as part of an investment strategy. The exchange rate of any given currency changes constantly and this volatility can impact your budget.

However, Arno von Helden, Co-Founder of Shyft, Standard Bank’s Forex App, says that there are ways to protect yourself against currency fluctuations when purchasing and storing forex.

Fortunately, there are now various forex apps available that make purchasing your currency of choice more convenient while offering the ability to easily track exchange rates and to make a buy when the rate hits a level at which you are comfortable with.

Standard Bank’s Shyft Forex platform, which allows users to buy, send, store and spend forex, is one such application that has found popularity with South Africans. The app has seen significant uptake since its launch in 2017 – acquiring over 100 000 users during the period.

“One of the biggest benefits of the app is the ability to purchase a currency in the Shyft wallet when the exchange rate is favourable,” Von Helden says. “Users can then store that currency in the Shyft digital wallet or transfer the funds to a virtual card at the rate at which it was purchased initially.”

With the means to purchase your currency of choice at a favourable rate and park it at that rate, users of Shyft are then protected from any fluctuations that may occur thereafter.

Standard Bank data gathered from the usage of Shyft reveals that the US dollar (USD) remains the most popular currency. The currency accounts for 50% of total conversions on the Shyft app. This is followed by the British pound at 25%, the euro at 20%, and the Australian dollar at 5%.

“The USD is the most traded currency for a number of reasons, one of which is due to its popularity from an investment perspective,” says Von Helden. “Many of our users have offshore investments denominated in USD and our share trading capability is also currently focused on US stocks.”

He explains that relative to the rand, the USD is well priced compared to the euro and sterling currencies.

“The largest utilisation of forex from a value perspective is for investment purposes. This is where people are transferring funds into offshore investment vehicles or their own offshore bank accounts, which then go into endowments or other investment-type products,” says Von Helden.

This includes offshore share trading capabilities like Standard Bank Webtrader, which is used to trade shares and other instruments. The purchasing of US shares with USD, for example, means that the buyer becomes the beneficial owner of the shares. Whereas when investing in foreign shares on the rand, the funds effectively haven’t left the country, which means investors don’t own the shares outright.”

Von Helden says that another one of the big advantages in this regard is that investors are externalising funds against their foreign investment allowance and can continue to hold those funds offshore,” says Von Helden.

But this isn’t the only use for a digital wallet.

“If you are travelling overseas for business or pleasure, or buying something from abroad, you want to make purchases in the currency of that country,” says Von Helden, who adds that when making payment in a currency that differs from your account’s base currency (South African rands, for example), there are always additional fees involved like forex spreads or admin fees.

Moreover, not all South African cards are accepted abroad, and those that do come with the caveat of hidden fees tied into every purchase. If the rand happens to depreciate, you will then be paying more for your purchases, and it becomes easy to lose track of what everything ends up costing.

For that reason, many who travel abroad or make international payments regularly are opting for a Shyft virtual or physical card. As it stands, users can create virtual cards in up to 10 currencies that are linked to their digital wallets. The physical card, which users can order via the app for same day delivery anywhere in SA, is multi-currency meaning that you can load USD, GBP, EUR and AUD simultaneously.

“Let’s say you are heading to Europe in the next month or so. As a Shyft user, you can purchase those euros ahead of time at a favourable exchange rate, hold them at that rate and then spend them while abroad using your virtual or physical Shyft card. This means that you can enjoy your travels without having to worry about movements in the rand and the fluctuating cost of your purchases while abroad.”

South Africans can also protect themselves from fees associated with purchases on online sites where products are priced in USD or EUR, for example, by using a Shyft virtual card set up for that specific currency and purchase. This also makes online shopping safer as your main account details are hidden when using a virtual card.

The success of the Shyft app is demonstrated not only by its significant increase in user acquisition since its launch but by the prestigious awards it has secured in recent times. The app was recognised as the MTN Business App of the Year overall winner and top app in the financial services category in 2017. It once again walked away as the top app of the year in the same category as part of the 2021 awards.

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