Currency hedging and how you and your business can benefit

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The definition of currency hedging

The aim of currency hedging is to effectively manage financial risk. Currency hedging is the use of financial instruments or contracts to limit your exposure to the fluctuations in the currency markets.

The use of such financial contracts will mitigate the risk against currency movements and in turn protect your company’s profits.

Benefits of a currency hedging strategy

There are many reasons organisations require the use of international payments. You may be an importer of goods from overseas or supply services to other companies abroad. All will result in currency transfers and subsequently exposure to the volatility of the foreign exchange markets.

The cost of overheads within a business can be securely budgeted for when paying for these in the company’s home currency. However, if these transactions need to be completed via international payments and in a currency, which is not where the company originates it automatically opens up the risk of fluctuation in currency price. This will make it more difficult to budget for and accurately estimate your income and expenditure. 

Using a hedging strategy will safeguard your company from potential losses by looking to secure a more favourable currency rate over a period of time. 

Another advantage of a hedging strategy is it takes the stress out of those companies who do not have the time to monitor the foreign exchange market and prices consistently. By locking in a hedging strategy, Currency Online Group will then ensure the plan is delivered on time and in line with what is agreed with the client.

Which hedging options are available?

At Currency Online Group there are several options available which will allow you to protect yourself from adverse prices in the currency market.

Some strategies will entail zero costs and no advanced payment will be required. To prosper from more favourable options these will generally be subject to a fee or deposit. 

As a starting point in devising a hedging strategy best suited to your company, it is suggested to get in touch and discuss a plan with one of our friendly staff from the international payment department on 0208 050 1546.

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