Why you aren't getting the 'latest rate' for the pound at the moneychanger

Why you aren't getting the 'latest rate' for the pound at the moneychanger

With the British pound diving to 30-year lows after the Leave faction won the Brexit referendum last week, there is no better time to buy pounds. But the "latest" exchange rates have yet to be offered at moneychangers here. If you are wondering why, business reporter Lee Xin En has the answer.

At The Arcade at Raffles Place, the best rate for the pound to the Singdollar quoted by moneychangers was 1.885, with a majority hovering at the 1.90 mark.

Moneychangers told The Straits Times that they would take some time to reflect the current interbank rate of about 1.82, adding that the rate they could offer also depended on whether the sterling stabilises.

Mr Arshad Hassan, manager of Sheen International Exchange, said that his rates are decided based on the cost price at which he gets his supply of currency from a wholesale supplier or a bank.

He said that his suppliers were quoting him prices above the interbank rates as they too did not want to make a loss based on the rates at which they had bought their supply of pounds.

He said: "Predominantly for G7 currencies, we depend on the banks for stocks. The banks are still not convinced that volatility has subsided, at least for the next few days. They are not sure whether they can sell the currency at the rates at which they sourced."

For suppliers who buy currencies in hundreds of thousands of dollars, they stand to make big losses if they sell for much cheaper, especially if markets rebound, said Mr Hassan.

He added that European markets have only had one full day of trading so far so suppliers and moneychangers would be watching to see if the pound stabilises.

There is an association of moneychangers in Singapore, but it does not decide on rates. Moneychangers said they decided on their own rates based on the cost of their stock and customer demand.

Mr Hassan said he had been fielding a spike in enquiries, but said he doubted that customers would bite unless his supplier gave him a rate of about 1.85.

Mr Mohamed Rafik, manager of Arcade Money Changers, said that the currency has to be imported from overseas, and there were various factors that contributed to the cost at which banks sell to moneychangers, such as insurance and freight costs.

It could take up to a week for the interbank pound rates to be reflected, he said.


This article was first published on June 27, 2016.
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