HERTFORDSHIRE GLOBAL
Managing Currency Risk During Uncertain Times We are currently experiencing some of the most volatile times in the past decade in currency markets, not helped by the ongoing global uncertainty and inflation well above where it should be.
T
he pound remains under pressure against the euro and the US dollar amidst a deterioration in market sentiment, confirming that global matters are taking a firmer hold of the currency’s prospects.
The same cannot be said if you are selling
For those that are exposed to the US dollar, it continues to benefit heavily during times of uncertainty thanks to its ‘safe-haven’ status. We have seen a seven per cent decline against the dollar in the last two months.
OPERATING CYCLE: By regularly
Dealing with a currency broker has
reviewing your business operating cycle
never been easier and they can help
you will begin to understand where FX
you manage your currency risk by
risk exists. This will help you determine
understanding your currency position &
UK inflation has come down steadily over the past couple of months, but did cool off earlier this month, raising further questions on whether the Bank of England should consider raising rates at its next policy meeting in November.
fluctuations.
However, the Bank of England governor has all but confirmed that interest rates will not rise in November, adding further pressure on the pound. Bank of England Governor Bailey’s comments will likely add downside pressure to the pound, which has fallen against both the euro and the US dollar this week, on top of disappointing retail sales figures.
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4. MANAGE YOUR EXPOSURE TO
euros and dollars.
CURRENCY RISK: Hedging can
If you are a manufacturer, importer or
help mitigate the uncertainty caused
exporter of global products or services, then here are four steps to manage your currency risk. 1. REGULARLY REVIEW YOUR
your profit margins sensitivity to currency 2. EVERY COMPANY HAS DIFERENT
within financial markets. Hedging protects company profits and can act as a safety net to protect against a declining market.
budget requirements. They can help build up a plan to provide you with a solution to managing your currency risk professionally
REQUIREMENTS IN FX: Every business
and effectively, allowing you to focus
is unique and will manage their currency
on what you are there for.
requirements in a way that suits the company. It is key to understand that currency fluctuations could have an impact and the decision to hedge or not is not that simple. Some companies prefer to simply ‘spot buy’ as and when they have a currency requirement, albeit riskier during times of uncertainty.
If you are using a provider or bank, why not request a comparison. During these times of uncertainty, saving money is paramount. Moving currency can be a complex procedure, but with the right partners it does not have to be. An FX broker can
3. DECIDE WHAT RULES YOU WANT TO
help take away the burden of trading and
APPLY TO YOUR FX RISK & STICK
monitoring rates, and manage the process
UK retail sales fell by a percent in September, and on top of this, the GFK consumer confidence survey showed that consumer confidence plunged in October by 14 points.
WITH IT: Having a clear understanding of
on your behalf, ensuring that you take
risk. Monitoring your FX risk ensures that
Ltd. If you have any questions, please
It all feels a little gloomy for those that are exposed to euros and US dollars, falling to six-month lows in the blink of an eye!
whatever the financial objectives are,
contact Kris Charalambides (Head of
such FX risks that could jeopardise those
Corporate FX) on 0207 183 7928 or
objectives are monitored and mitigated.
email: kris@imsfx.co.uk
INSPIRE
the company’s financial objectives and the potential effect the changes in FX rates might have are key in managing your FX
advantage of the market at the right time. Information supplied by UK FX Holdings
