Follow our analysts
FX Hedging solutions
Fluctuations of exchange rates in the FX markets generate a foreign exchange risk. The risk is reflected as changes in the rates used in FX trades and in the value of loans and assets, for example. However, there are many ways to hedge FX risk.
The purpose of FX hedging is to safeguard the sales margin of a company engaged in foreign trade against FX movements. When you are planning hedging, you should base it on a realistically budgeted FX rate. You should select the hedging horizon and hedging level on the basis of the predictability of your business.
- The purpose of FX hedging is to safeguard your company's margin against FX movements.
- The hedging strategy will define the hedging horizon, the hedging level and the hedging instruments used.
- Hedging instruments can be tailored to suit the company's needs.
Choose the right hedging instrument based on your need
There are many types of hedging instruments, which differ in terms of obligations, potential to benefit from favourable FX rate changes etc. A forward will fix the future rate, whereas an FX rate protection will offer full protection without fixing a certain rate. The protection can also be tailored in a way that full protection is achieved without losing all the potential to benefit from favourable FX rate changes.
Don’t jump into the unknown – identify and manage the risks.
A risk policy is a tool for setting targets and practices for market risk management.