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Best solution for paying in US$ to overseas suppliers?

Discussion in 'Money Management' started by kevinsmith, 24th Nov, 2008.

  1. kevinsmith

    kevinsmith Member

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    Melbourne
    Hi,
    We make payment to overseas suppliers in US$ but recent drop/fluctuation in aussie dollar has put us in a difficult situation.

    Can we open a bank account in US$ so that whenever there is good conversion rate we can convert A$ to USD and pay our suppliers straight in USD without worrying about foreign currency rate.

    Please share any experience or other options available.

    Thanks in advance.
    Kevin
     
  2. Billv

    Billv Getting there

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    Hi Kevin

    I know how you feel, a lot of importers are feeling the pain atm.

    You can open up an account in USD with the major banks
    You can buy currency and put it in there and use it as you see fit
    The flexibility, payment options etc will depend on the bank you are with.
    You can buy currency progressively as your orders come in so that you have locked in the purchase price so to speak and use those us$ when the goods arrive.

    There is another option (I forget what it's called now) where you pay a fee to lock in the currency at the daily spot price and you specify a certain date when you are going to need those funds. After the nominated date you have to either buy the funds at the locked rate or to let them go.

    If your overseas order is late and has not come in at the time you've nominated you may have to pay for the funds and keep them in your US$ account. This practice it costs a bit of money so obviously you won't be doing it for small amounts but it helps with your cashflow.
    Talk to your bank.

    I hope this helps.
     
  3. AsxBroker

    AsxBroker Well-Known Member

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    Hi Kev,

    BV is probably talking about forward cover...locking in a pre-determined rate for the future (hence "forward" cover) as far as I'm aware you can't walk away from these deals (like futures trades). Personally I always thought a currency option cover would be best as it allows you to insure yourself against downside but still take any upside if the currency goes in your favour. Not sure about the costs of either though as I don't import or export.

    Like BV said, speak to your bank as they'll know all the different choices you can make re currency exchange.

    Cheers,

    Dan

    PS This is general information. Speak to your bank before wheeling and dealing in foreign exchange as they will be able to tailor a solution to your individual needs.
     
  4. Billv

    Billv Getting there

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    Dan
    Yes that's the word I was looking for.
    I don't remember any more now but his bank should be able to help him out
    Cheers
     
  5. kevinsmith

    kevinsmith Member

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    Thanks Bill/Dan,

    I spoke to ANZ bank today about their Foreign currency account. This is exactly what we need but they have many strings attached to the account as you would expect like you have to have minimum US$10K in account all the time otherwise they charge hefty acc fees. If balance is less than US$25K no interest is paid and so on.........

    I was thinking another option as my wife is Canadian citizen. Hopefully we can open online account with Canadian bank and use that for fund transfers. I'm not sure if it's feasible option but I'll inquire few banks.

    NB> As Dan mentioned that forward cover doesn't help you if currency goes in forward direction.

    Cheers,
    Kevin
     
  6. AsxBroker

    AsxBroker Well-Known Member

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    Hi Kevin,

    I imagine that the interest that a bank may pay on a USD account would be much less than what you may get paid on a AUD account.

    Is it feasible to put the purchases on a credit card? (Great for points...)

    Cheers,

    Dan

    PS This is general information and not tailored advice.
     
  7. pthm

    pthm Well-Known Member

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    I don't know if this is any help to you - but we have been investigating the opening of a US$ bank account for a future property transaction. I looked at the major banks' websites for info and found they were not much use. However, I contacted HSBC in Sydney and they said they would be able to do this for us. It is not just at any HSBC branch, it is their international banking centre in Haymarket. Their contact phone number is 1300 131 623 or send them an email ibcaustralia@hsbc.com.au - to ask them for the application process and any questions pertaining to your situation. There is a fee associated with the application, but they said it will be refunded if your application is not successful?
     
  8. C3PO

    C3PO Well-Known Member

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    In my experience overseas banks are far more interested in doing this sort of thing for customers than Australian banks. HSBC would be your best bet I think.

    HSBC probably the best local bet:
    Foreign Currency Account. Foreign currency banking | HSBC Australia

    Alternatively, if you are happy to bank offshore, then options open up for you a bit. Perhaps opening an account in the country where your supplier is based might be an option? (Singapore banks for example offer excellent capabilities to customers to hold foreign currency)
     
  9. kevinsmith

    kevinsmith Member

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    Sorry for late reply, I was waiting for response from Canadian banks.
    Unfortunately they can't open account until you are physically present in Canada. So that option is not practical at this moment.

    Dan, Our suppliers don't accept Credit cards but we tried this option to US suppliers in the past. Even thou you get many points but very risky as you don't have any control over the conversion rate. Credit companies don't do their conversion rate at the exact time of transaction rather it happens few days later.


    I'll follow C3PO's idea and see if any luck with HSBC...

    Thank for all the help thou.

    Cheers,
    Kevin
     
  10. Chris C

    Chris C Well-Known Member

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    If you are planning to make payments in USD over the long term I wouldn't worry too much Kevin, I think the USD will weaken against the AUD in the coming months and years as the FED is forced to finace their own debt from both this financial crisis and the large government defecits that will no doubt occur over the next few years.
     
  11. kevinsmith

    kevinsmith Member

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    Hi C3PO, Just to give you an update that we opened HSBC foreign currency account and very happy with the service so far. That's exactly what we're looking for....

    1) Best conversion rate
    2) Can convert from AUD to US or vice versa with ease.
    3) Nominal fees.

    Thanks for your help.
    Kevin
     
  12. C3PO

    C3PO Well-Known Member

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    Kevin that's terrific, very glad to be of help