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Difference Between Locked-In or Indicative Exchange Rates

Updated on April 12, 2022 02:03 pm
Currency Exchange Rate Monitor

Foreign Exchange rate is the rate at which one currency can be exchanged for another. It is the value of one nation's currency in terms of another's. For example, the exchange rate for USD to INR may be based on a multitude of factors. The two types of exchange rates are

  • Locked-In Exchange Rates, also known as Fixed Exchange Rates
  • Indicative Exchange Rates, also known Floating Exchange Rates

Locked-In Rates:

With Locked-In exchange rates, the value of a nation's currency is fixed against the value of another single currency. The government or the central bank sets this exchange rate in order to maintain the official currency value within a narrow band and keep interest rates down. This also ensures appropriate exchange rates which the government can adjust whenever necessary.

Locked-In Rates

  • Ensures stability in the exchange rates.
  • Remains nominal, as is set by the government.
  • Reduces transaction costs.
  • Prevents risk and uncertainty in transactions.
  • Has no automatic mechanism to adjust the change in supply and demand of currency.
  • May devalue the domestic currency for massive amount.
  • Is excluded from free market benefit.

While making an international money transfer, with locked-in rates, the exchange rate is fixed and this exchange rate is applied at the time of converting the money to overseas currencies.  It also means that the sender would know the exact amount of money that will be received by the recipient. This is a useful option if you have a fixed commitment overseas like a loan EMI, property purchase or mortgage, etc.

 

Indicative Rates:

Unlike locked-in rates, which are fixed, indicative exchange rates fluctuate according to free market forces of supply and demand. The changing market conditions cause the exchange rates to fluctuate constantly. Neither the government nor central bank interferes in determining the price of currency. However, in some conditions, the central bank participates to reduce day-to-day fluctuations in the exchange rates. Indicative exchange rates are also known as floating exchange rates, which include two types: Free Float and Managed Float.

  • Free Float: The free float exchange rate is also known as a clean float. In this case, the exchange rate is determined by the currency's force of supply and demand, with no intervention from the government. However, there is a high risk of the currency becoming volatile under a free float exchange rate.
  • Managed Float: The managed float exchange rate is also known as a dirty float. In this case, the government and central bank contribute in setting the exchange rate. It is a variation of free float that reduces the risk of currency volatility.

Indicative Rates:

  • Automatically adjusts the change in supply and demand.
  • Gives flexibility to determine interest rates.
  • Fluctuates rapidly.
  • Sometime leads to inflation, which has to be controlled by the government.

Indicative exchange rates, are floating exchange rates that not locked/fixed at the time of making of the transfer/transaction. In this type of transactions, the exchange rate applied is the foreign exchange rate at the time of making the transfer or conversion to overseas currencies. Since the rate fluctuates, the amount received by the recipient may vary depending on the market.

For example: If the current exchange rate for USD to INR is 1USD for 55INR, and you are transferring USD100 to India, then the recipient will receive 5500INR if you use locked-in exchange rates. If you choose indicative exchange rates, you will not know the exact amount of money that will be received because the exchange rate may vary on the day the money is transferred. If the exchange rate has fallen to 1USD = 54INR, the amount receivable would be 5400INR, or if the rate has increased to 55.5INR, the amount receivable would be 5550INR. If you don't like surprises, locked-in exchange rates are your best option.

Whether you select to send money with locked-in exchange rate or floating exchange rates, there are various ways to send money overseas and various factors to consider while sending money overseas. It is very important that you compare these factors in order to find the best way to send money overseas. Here are some important money transfer tips that will help you make a informed decision.

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USD to INR Forecast 2024
USD to INR Forecast 2024

The year 2022 concluded with the Indian Rupee hitting an all-time low against the US Dollar. The COVID-19 pandemic significantly impacted global economies, leading to the devaluation of the Indian Rupee. Throughout the pandemic, the rate experienced a gradual decline in value, setting the stage for potential recovery in 2023.The US Dollar to Indian Rupee exchange rate did, in fact, see that recovery over the year’s performance. 2023 ended on a high, with the exchange rate averaging at $1 = ₹83.249 in December 2023.As we are well into 2024, it is crucial to begin looking to the future and understand what the predictions for the year’s rates are. 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On January 20th, 2023, the USD to INR exchange rate reached its lowest point for the year. However, as the year progressed, 2023 witnessed a slow but steady increase in the exchange rate compared to 2022. The USD/INR rate experienced a positive shift of +0.62% in 2023, indicating an increase in the value of the US Dollar against the Indian Rupee. The year's peak rate was recorded at 83.442 INR on September 19, 2023, with an average exchange rate of 1 US Dollar = 82.579 Indian Rupee for the year.Various factors contributed to the strength of the USD against the INR and the subsequent exchange rate fluctuations. Economic indicators, such as GDP growth rates, inflation, and employment data, played a significant role. Additionally, geopolitical events, trade policies, and interest rate differentials between the US and India influenced investor sentiment and currency valuations.What Factors Contribute to the US Dollar’s Strength & Exchange Rate Fluctuations?Various factors contributed to the strength of the USD against the INR and the subsequent exchange rate fluctuations. Economic indicators, such as GDP growth rates, inflation, and employment data, played a significant role. Additionally, geopolitical events, trade policies, and interest rate differentials between the US and India influenced investor sentiment and currency valuations.The aftermath of the pandemic boosted investor confidence in the robust US economy, while economic indicators, trade imbalances, and geopolitical events played their part in shaping the fluctuations of the USD to INR exchange rate in 2023.Will the Indian Rupee Get Stronger Against the US Dollar in 2024?Current market sentiment indicates a bullish outlook for the USD to INR exchange rate. That means the overall market-in favor of the United States-is expected to go higher, meaning that the value of the US Dollar is expected to increase. The US Dollar is projected to experience a 1.64% rise in the next year, with the USD to INR rate anticipated to reach around ₹ 84.82. We have already begun to see the rate reach closer to that rate as the yearly average so far has been around ₹ 83.17.[Source: Coincodex]This is good news for those hoping to send money to India in 2024 as the rate leans more favorably for the US Dollar. It is, however, unfortunate news for those wanting to convert their Indian Rupee to travel to the United States, study in the USA, etc. 2024 USD to INR ForecastAs we peer into the crystal ball for 2024, as stated before, the current sentiment in the USD to INR market is currently estimated to be bullish. The 14-day RSI reading is 53.64. Forecasts suggest an upward trajectory for the USD to INR exchange rate in the coming months. Projections for the next six months indicate a potential 1.42% increase, bringing the exchange rate to ₹ 84.64. Looking further into the future, as stated earlier, the one-year forecast anticipates a 1.64% rise, resulting in a rate of ₹ 84.82.2024 Monthly USD/INR ForecastThis all can be very overwhelming for those of us unfamiliar with how to navigate market fluctuations or even interpret terminology used by experts when discussing the exchange rate and market health. 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The average exchange rate is 82.73.Dollar to Rupee forecast April 2024: At the beginning 82.78 Rupees. At the end of the month 82.67, the change for April -0.1%. Maximum 83.91, minimum 81.43. The average exchange rate is 82.70.Dollar to Rupee forecast May 2024: At the beginning 82.67 Rupees. At the end of the month 82.53, the change for May -0.2%. Maximum 83.77, minimum 81.29. The average exchange rate is 82.57.Dollar to Rupee forecast June 2024: At the beginning 82.53 Rupees. At the end of the month 82.61, the change for June 0.1%. Maximum 83.85, minimum 81.37. The average exchange rate is  82.59.Dollar to Rupee forecast July 2024: At the beginning 82.61 Rupees. At the end of the month 82.82, the change for July 0.3%. Maximum 84.06, minimum 81.58. The average exchange rate is 82.77.Dollar to Rupee forecast August 2024: At the beginning 82.82 Rupees. At the end of the month 83.16, the change for August 0.4%. Maximum 84.41, minimum 81.91. 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UK to Philippines
How to Send Money from the UK to Philippines

Sending money from the UK to the Philippines is a significant financial transaction that requires careful consideration to ensure efficiency, cost-effectiveness, and security. As an immigrant or someone supporting family and loved ones back home, understanding the process and selecting the right remittance service is crucial. Do not worry. CompareRemit is here to guide you through all of your remittance needs. In this guide, we'll walk you through the essential steps, considerations, and top remittance providers to help you make informed decisions and maximize the value of your money transfers.Things to Consider Before Transferring Money from UK to PhilippinesBefore initiating a money transfer, it's crucial to grasp two essential factors: exchange rates and transfer fees. The exchange rate refers to the value of one currency relative to another. For example, if the GBP to PHP exchange rate is 1 GBP to 71.81 PHP, it means one British pound is equivalent to 71.81 Philippine pesos. 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With a focus on customer satisfaction and reliability, PassTo is an excellent choice for sending money to the Philippines and beyond.Frequently Asked QuestionsQ: What are the best rates from GBP to PHP?A: As exchange rates fluctuate, it's advisable to monitor platforms like CompareRemit to find the best rates from GBP to PHP offered by various remittance providers.Q: When is the best time to transfer money from the UK to Philippines?A: Monitor exchange rate trends and utilize comparison tools to identify favorable transfer windows.Q: How can I compare money transfer services from the UK to Philippines?A: Utilize comparison sites like CompareRemit to compare money transfer services based on exchange rates, fees, transfer speed, and customer reviews.Q: What is the best way to transfer money to the Philippines online?A: The best way to transfer money to the Philippines online is to use a reputable remittance provider, ensuring competitive rates and secure transactions.Q: How can I ensure the safety and security of my money transfers?A: Choose reputable remittance providers with robust security measures in place to safeguard your transactions.

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