The amount of foreign currency investors can get for their money can change dramatically in a short space of time . Many local currencies are highly exposed to overseas developments, so investors react to news from across the Asian region and globally, as well as domestic happenings and data.

This can play havoc with your plans to buy property abroad. When it comes to transferring large sums of money, small shifts can make a big difference. A week of volatile movement on the currency markets could alter the amount of your national currency you need for your property purchase substantially.

This doesn’t mean you’re left at the mercy of the unpredictable currency markets. You can still plan ahead and accurately budget for your property purchase. There are a number of currency tools available to help you protect your transaction from currency risk, and they’re not as complicated as you might think.

A forward contract is best suited to large international transactions. It allows you to fix a favourable exchange rate for up to a year in advance. Regardless of what the market is doing when the forward becomes due and you need to send the money, you get to use the rate you locked in when you set up the contract. Once the forward contract is established, you are obligated to make the trade for the set amount and during the specified time period.

This can not only save you a lot of money, it also makes it easier to budget; because you know the exchange rate you’ll be using up to 12 months in advance of making the transfer, you know exactly how much money you need to save to meet your costs.

Compare this to making a ‘spot transfer’ at whatever the market rate will be, where the difference between now and then could reach into the tens of thousands of dollars.

Let’s take some of the best and worst AUD/USD exchange rates of 2016 as an example. When the exchange rate was at its strongest, US$100,000 would have cost AU$128,122. But just over a month later, US$100,000 would have cost you AU$139,256.

That’s a difference of AU$11,134 that you could have saved if you had fixed the earlier rate using a forward contract.

There are other ways of protecting yourself too. A limit order targets an exchange rate higher than the current market rate. If the market hits that rate, your money is automatically transferred to ensure you don’t miss out on it.

Meanwhile, a stop-loss order sets a threshold lower than the current market rate below which you do not want to trade. You can wait for a better exchange rate, but should exchange rates weaken to the specified level, your stop-loss is triggered and your transfer conducted before you lose any more money.

You can even combine stops-loss and limit orders to hold out for a better rate without risking losing out if the market turns against you.

As you can clearly see, protecting yourself against currency risk is not only straightforward, it can also save you thousands of dollars. While the foreign exchange markets may be unpredictable, you can use currency tools to remain in control of your finances.

Budget better, make your funds stretch further, and enjoy peace of mind when purchasing property overseas.

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