- The aim of this guide is to help businesses understand their forex risk.
- What can you do to protect your business in times of uncertainty?
- Why its important to deal with a currency specialist in times like this.
South African importers are experiencing serious supply disruptions due to the coronavirus pandemic which is wreaking havoc across the globe. We’re not prepared for coronavirus.
Most of us have never personally experienced a crisis quite like this one. This will not be a crisis that will go away any time soon. As business owners, we cannot afford to bury our heads in the sand.
We’re encouraging clients to take a proactive stance on their short-term commitments. An effective forex strategy will require knowledge, experience commitment and patience. With so much uncertainty in the market it’s worth speaking to a currency specialist like FX Paymaster. They have the tools, market knowledge and product experience to help clients navigate their way through nasty, unpredictable market conditions exactly like this.
The rand took a big hit this week after the Department of Health confirmed the first case of the COVID-19. Four days later – the numbers have jumped to over 150 reported cases. Markets are clearly concerned about the impact that Covid-19 will have on the SA economy and our fiscal position.
The aim of this guide is to simplify the concept of FX risk and help you protect your business against further drops in the Rand.
The first step for any business making regular international payments is to recognise that a risk does exist. The next step is to assess the size of the risk and decide what to do about it.
UNDERSTANDING FOREX RISK
Transaction risk occurs as a result of timing differences between contractual commitments and actual cash flows. When assessing the true value of your risk, you should estimate how much the exchange rate could move between now and when you need to make a payment, and how that movement could affect the value of your future transaction(s). If you’re unsure of how much the market is expected to move, then call our dealing room for a live update.
The Foreign Exchange market moves constantly with exchange rates changing every second. As the market moves, the value of your payment(s) will change and could go up or down. All businesses, large and small, with exposure to international currencies will find it challenging to manage foreign exchange risk in this market.
What can you do to protect your business?
ONE – TAKE OUT FORWARD COVER TO REDUCE UNCERTAINTY & RISK
Forward contracts are easy to use, quick to implement and are specifically designed for reducing or eliminating risk on future dated payments. A forward contract is an agreement to exchange currency at a future date based on a price agreed today. By fixing or freezing the rate now, you eliminate your exposure to the market and protect yourself against further adverse currency movements. A good way to manage risk in a market like this is to take out partial hedges and stagger your forward cover amounts.
TWO – GET REGULAR FOREX MARKET UPDATES
Foreign exchange is all about information and decision making. The South African Rand is considered the world’s most volatile major currency. Keep your finger on the pulse with FX Paymaster. Sign up to receive our daily traders view and regular market releases. Get the latest foreign exchange news & insights delivered directly to your inbox. Designed to educate, inform and add value.
THREE – SET UP FX RATE ALERTS
Exchange Rate alerts are free and easy to setup. Simply call our dealing desk and tell us the rate you’re interested in and we’ll monitor the markets for you. If the rate you have specified becomes available, we’ll contact you. Rate alerts are designed for customers who don’t have the time or tools to monitor the market themselves.
FOUR – USE FOREX MARKET ORDERS FOR OVERNIGHT TRADING
Market orders are similar to rate alerts however they trigger into a firm buy or sell order once the exchange rate becomes available. Simply tell us what level you would like to trade at, and we’ll put an instruction into the market to trade at that level should the price become available. Market orders are designed to trade 24 hrs a day. For more info on Limit orders and Stop Loss orders, call our dealing desk on (011) 888 0125.
FIVE – DEAL WITH A CURRENCY EXPERT
For more information about the Rand and how to maximise your international payments, speak to FX Paymaster. We are a leading provider of corporate and personal foreign exchange, offering insight and guidance to help clients more effectively manage their international transfers.
Unlike banks, we focus solely on foreign exchange. Our in-depth knowledge and expertise enable us to fully understand all aspects of our clients’ foreign exchange requirements.
