I am currently UK based and am in the middle of the acceptance process on a Bachelor status. As I am a Bachelor, I will continue to have GBP expenses yet will be paid in USD. The current exchange rate is fairly favourable at about 1.33 USD to GBP, however, it has been as high as around 1.8 in the not too distant past and certainly in the timescale that my contract runs to. Movements in the rate where GBP strengthens will clearly be detrimental to me. What methods (if any) is anyone using to minimise or remove the effect of exchange rate movements. I've considered placing a spread bet of an appropriate size and direction to cover the risk of GBP strengthening in the near term as a low cost option. I've also considered taking out two opposite spread bets to create an artificial "collar" (cap and floor) on the exchange rate.
As a follow-on much more difficult question, what does anyone anticipate the exchange rate movement will be over the coming years and why. Clearly the Brexit negotiations (which might actually be concluded at some point in the nearish future!) will make GBP more or less desirable but there are also numerous US potential impacts. Thoughts anyone?
Is this aspect of risk addressed in the package offered by Aramco at all?
Currency fluctuation is surely a big risk for us from UK. Earlier, aramco used to do GBP salary however, they stopped doing it as SAR is hedged against USD and is less risk for them. We just have to hope that GBP does not perform well amid all political uncertanities.
Experion - surely the answer is not to just hope that the pound doesn't strengthen is it!?
StarboyX - yes I know that some of my expenditure is going to be in SAR (and therefore effectively USD) and therefore doesn't need to be managed, but my family expenditure is not.
Mortgage; school and University fees and living expenses of the majority of the family is something that really would be good to manage the risk exchange rate movements of. Also eventually everyone returns home and will have to translate any remaining USD (including the termination payment for example) into the currency of the location where you will end up. With sterling relatively weak it may be worth locking in a rate for at least some of your anticipated expenditure and eventual USD assets at a known exchange rate. Converting as you go into other currency as some sort of pound cost aveing method is ok but still leaves you partially exposed generally and specifically exposed to a system shock of some kind. Obviously not an issue for those from the States but for the rest of us I would have thought this was a pretty major issue?
Sterling has depreciated in value by about 20% in the last 2 years which is a very nice little windfall for those eventually moving back to Blighty - IF Sterling remains weak... By contrast, GBP may weaken further, for instance perhaps if the UK crashes out of Europe under WTO rules (not an impossibility). Hence my question on what do people think about the direction of GBP vs USD.
An absolutely ideal solution would be to remove the risk of the relative weakening of USD and to benefit from any strengthening without incurring a large up front cost... Anyone out there doing anything clever? Please do message me directly if you feel more comfortable doing so.
Have you asked about the FX protection scheme? Aramco used to offer it whereby they offer you monthly either the current rate or 95% * of the three year avee of your chosen currency (i.e. for 2018 the avee FX rate in 2015-2017), whichever is the most preferable. Not sure if this is still on offer. This may offer some protection against really big movements. In addition, taking a position (bet) is probably the best choice. I feel that once you start following the FX you will get a better feel of what to do, as no one can really know how to advise you now. Lastly, I believe Aramco converts - monthly - the salary (at the end of the month) with the rate on the first business day of the said month. This gives you some time to decide if you want your USD converted, or whether you want to deposit them in USD/SAR and get them converted at a later stage (presumably at a move favorable rate). Do search the forum for more on this. There was a thread on FX, albeit it is now some years old.