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FX hedging instructions
Exchange rates often fluctuate heavily. For example, in recent years, the exchange rate between the EUR and the USD has changed an average of 9% in six months. At most, the change over a six-month period has been as much as 20%. Variations this high may have a material negative impact on the earnings of a company engaging in foreign trade.
FX rate movements affect companies in many different ways. FX rate movements cause variation in
- the euro value of the company’s receivables and payments in foreign currencies
- the value of other balance sheet items, such as loans, in foreign currencies
- the value of foreign assets, which causes variation in the company’s equity and thus has an impact on the equity ratio, for example.
Read the detailed FX hedging instructionsOpens new window with examples (in Finnish).