Managing currency risk
The foreign exchange market is volatile, with unpredictable shifts leaving many importers and exporters vulnerable to significant revenue losses. To protect your profitability you need to manage foreign exchange as a business risk, and consider your foreign exchange strategy as integral to your business plan as distribution, logistics and marketing.
Irrespective of the Australian dollar’s position, you can employ strategies to provide risk insurance, such as hedging, which allows you to lock in current exchange rates for future payment dates, protecting you from currency downturns and allowing you to control costs. We offer both forwards # and options # as risk management solutions, and Holding Balances * as a method to facilitate the currency risk.
Forwards
A forward contract offers certainty and protection by locking in the current rate for future use. A forward is an agreement between you and Travelex GBP Australia Pty Ltd, to buy or sell a fixed amount of foreign currency at an agreed rate, for a set period of time. You will enjoy pricing certainty by locking in a rate for future use, helping you to accurately budget, control costs and potentially protect your profit.
We offer two types of forward contracts:
A Forward Exchange Contract (FEC) is calculated using the spot rate for the relevant currency, adjusted by the forward points, which reflect the difference between the two countries’ interest rate expectations over the period of the contract.
A Par Forward lets you fix one rate for a series of forward dates. When we calculate a par forward rate we will take your specific payment dates and amounts into consideration.
Benefits include:
| FEC | Par Forward | |
|---|---|---|
| Cost certainty |  |
|
| Can pre deliver | |
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| Protect bottom line against adverse currency movements | |
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| One rate across several dates | |
Options
Options can be used as a hedging tool combined with forwards and spot deals to help protect business margins.
Options are a way for you to manage your foreign exchange risk, whether your business is large or small. Our products provide varying degrees of flexibility, participation and protection to suit your unique circumstances and our risk solutions experts will work with you to tailor an options strategy that meets your global payments needs.
Holding Balances *
Holding Balances let businesses of all sizes maintain reserves of foreign funds. The funds may be used to execute outgoing payments in the same foreign currency or may be converted into another currency at any time.
Used in combination with market monitoring and risk management tools, Holding Balances enable businesses to strategically buy foreign funds when the market is favourable and store them in anticipation of upcoming payment needs. Additionally, Holding Balances can be leveraged for cross currency settlement when a cross rate offers a greater potential for savings than the rate against the Australian dollar.
Holding Balances are a great alternative to the numerous restrictions applied to traditional foreign currency accounts offered by the banks. This service is free, you can manage your Holding Balance online, and there are no account balance requirements so you never have to worry about keeping funds tied up just to meet a minimum account balance.
For more details on how we can help you to manage your currency risk exposure please contact us on 1800 730 400 or e-mail enquiry@travelex.com.au
*Holding Balances are provided by Ruesch International, Inc. (A Travelex Global Business Payments Company). Holding Balances do not pay interest and funds cannot be kept in a Holding Balance for more than 90 days.
#Forward and Options are provided by Travelex GBP Australia Pty Ltd
