FOK order is when overseas companies buy currency in bulk to sell to their currency-selling branches, overseas or domestically.
Generally, the purpose of doing this is because the company’s currency (in this case, Japanese yen) has devalued against another currency (in our case, usually USD ), and they want to make money off the difference in exchange rates.
The rate used for this transaction between companies is different from what banks charge. Usually, it will be about 1% lower than what a bank would offer if making that same transaction.
This means that both parties are saving money on the deal since it is costly for either side to carry out these transactions themselves without using a broker service.
The use of FOK orders has increased in the past two years due to Japan’s prime minister Shinzo Abe printing more yen, rising inflation and devaluing the currency. Since other countries are only trading with Japan because of supply and demand, companies are taking advantage of this fact.
Companies with extensive overseas operations do not rely on FOK orders as much since they use their subsidiaries to support themselves. Still, international companies without subsidiary branches depend on this service heavily, mainly medium-sized companies.
These businesses usually use FOK orders every month or every other month for very short durations because it would be too expensive to hold onto Yen for a more extended period because of the high costs associated with maintaining inventory. This makes them an ideal candidate for these services.
The main reason these FOK orders are so widely used is that they are instantaneous, unlike wire transfers, where it can take several days for your transfer to go through.
Companies that offer this service can charge a fixed rate or use an average value of the Yen-Dollar exchange rate. This makes their price predictable and easy to negotiate with
These services usually cost between 0%-0.5% depending on how much money you’re trying to send at once. Companies offering these services also don’t require any additional documentation or identification when signing up.
These transactions are limited to companies in Japan, but they can be done anywhere globally with branches related to other companies abroad.
Although it might seem strange for a company to offer such services, they make up more than 50% of all transactions on the FX market.
Although many companies think it’s better to use their subsidiaries instead of FOK orders, there are some disadvantages. Money not used in these transactions can’t be held onto and used later at a later time or date. This means that if you don’t have firm plans for purchasing yen, then using FOK orders is probably your best bet.
The other disadvantage would be people with large amounts of money who need overnight approval and delivery of their funds, which cannot be accommodated by companies offering this kind of transaction service.
It might seem strange for businesses to cater to average consumers, but almost all companies will offer these services to anyone who signs up for an account with them. This is because the risk of not getting paid back is minimal due to the high likelihood that whoever signed up has a business of their own and is simply trying to save money on their exchange rate transactions.
In addition, there are no limits as to how much money you can send through FOK orders, which makes them more attractive than wire transfers or even credit card payments.
Although there might be a lot of red tape when it comes to legalities, this service is beneficial in seasons where tourism from Japan increases. Hence, companies have a means of converting Yen into foreign currency.
Some of the most popular banking branches offering these services are Mitsubishi UFJ, Mizuho and SMBC.
The reason why these services work so well is because of the fact they operate on an open market which means they can set their rates. Therefore although the government might be printing more yen, companies can take advantage of this and increase their profits.
On top of this, since many businesses use FOK orders to save themselves from exchanging currency at a loss, companies that offer these transactions usually provide some rebate or coupon to attract more customers.
Although it might seem complicated for people who want to make use of these services, there aren’t any problems with sending money through FOK orders as long as you know how much you’re planning on spending.
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