should a company hedge against forex risk?
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Tagged with: Company • Forex Questions • risk
Filed under: Forex Information
Companies engaged in foreign trade would be well advised to hedge their currency risks if they know what is good for them. They are in the business of selling products and services. Not in the business of engaging in currency speculation.
depends on whether the company wants its earning to be volatile or stable
the company has payables and receipts from different countries – in that case it may not consider hedging
- whether the company wants to gamble on currencies moving in its favour
- the analysis of the economics employment, interest rates may reveal the currency may not move in its favour – it may want to hedge then
most of ppl enter forex market to get a luxury lifestyle regardless of how much they can loss,they just look at the millions they can make out of this market.
How to Lose ? what to Lose ? you can make 100 trades/month , 50 winners and 50 losers and you are still in profit.
Main forex rule #1 , #2, #3 is profit:loss ratio in any trade , u gotta keep it more than 1 !!!!
Managed forex fund is a safer bet than most UR equities market
A company should if its exposure is ‘material’.
Especially with Gordon Broon in charge.
Just look at the pound to the Euro. UGH!
TThe GBP is an unstable currency and, if you are in the UK, it is well worth hedging.At least you know what your forex exposure is. (i.e how much your foreign debts are going to cost).
OK thing may get better and you may pay more than the future rate. But at least you will not get any unpleasant surprises.
Remember that the British Chancellor of the Exchequer was a Trotskyist and that all photos of him in a Commy beard have disappeared on the net. Be afraid. Very afraid!
It depends… on the exposure.
If even small flactuations in currency will cause a loss of thousand of pounds than yes, you should hedge.
Only big companies hedge as for small companies it’s more expensive to hedge.
Yes,
You can accept payment in multiple currencies to hedge, you can structure the contract to get fixed USD payments regardless of local currency fluctuation, or buy puts and calls to hedge, its up to you. One poorly written contract can plummet a companies profits.!!
Best Regards
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Mark A. Mc Donnell, Owner
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