Irish Times questions on personal finance

The current low interest rate environment is encouraging Irish investors to look further afield in the hopes of better returns. A key point to bear in mind, however, is that once you travel outside of the euro zone, investment performance is not the only criterion to be considered – you have to factor in the vagaries of the currency market too.

With Brexit on the horizon, Donald Trump in the White House and a spate of European elections on the cards, the only certainty about exchange rates right now is likely to be uncertainty.

When considering investments where the underlying currency is other than euro, the foreign exchange implications should be carefully considered, says Gerry Gallen, senior manager, Moneycorp Ireland, a foreign exchange and money transfer business.

“If, for example, someone had exchanged euro for sterling in November 2015, and invested the funds in a British pound deposit account, UK shares or property, the value of the investment in euro terms is currently worth 20per cent less.”

This means that the share or property will need to have appreciated in value by this magnitude to leave the investor back where they started. “This can work both ways, of course. Someone who switched their funds from the euro to US dollars in May 2014 would currently be sitting on a foreign exchange gain of over 35 per cent on the investment.”

He says Moneycorp provides competitive exchange rates, low transfer fees and direct access to a dedicated dealing team. As well as one-off payments and regular transfers via direct debit, users can buy forward contracts, fixing the current exchange rate up to two years in advance of a payment, so you don’t have to worry about the market moving against you – handy for buying and selling property or making other large payments.

It also offers advice to help investors navigate the currency implications of non-euro assets. “The world of foreign exchange has an air of mystery to it, and people can often engage in transactions without fully interrogating the underlying rates of exchange,” he says.