Currency funds are exposed to foreign exchange risks. Many companies tend to make calculations in one currency which means that any asset revaluation in a foreign currency is likely to bring about either profits or losses when the rate of a given currency changes. Hedging against foreign exchange risks allows companies to protect their funds from undesirable or unpredictable currency rate fluctuations. Companies may fix the actual cost of funds by conducting deals in the global currency market.
Hedging enables companies to avoid the risk of currency rate fluctuations as well as to plan future business steps and track the actual financial performance, which will not be distorted by market volatility. Moreover, it also provides the opportunity to set prices for goods and services, calculate the company’s profit, salaries, and other expenses.
Hedging against foreign exchange risks with the use of leverage offers additional benefits:
The strategy of hedging against risks in foreign trade operations lies in opening a position on a certain currency opposite to a future position for funds converting.
For example, an importer willing to purchase a foreign currency opens a long position on the trading account in advance and needs to close it by the moment of the actual bank transaction.
Conversely, an exporter is going to sell a foreign currency. Therefore, he opens a short position in order to sell the currency in advance and, by the time of the actual bank transaction, he closes this position.
An importing company is expecting the supply of a consignment from the United States for a certain sum in the US dollars. The company holds euros on its bank account. In order to perform the transaction, the company needs to convert euros into dollars at the bank. By opening a deal on the trading account, the company hedges against the risk of an unexpected dollar rate hike. If it uses the 1:1,000 leverage, it is necessary to invest about 1% of the sum which needs to be hedged. In case the US dollar goes up, the company suffers losses due to exchange rate fluctuations. However, the profit it receives from the deal compensates this loss.
Therefore, the currency price is fixed, and the total sum of profit and loss will always equal zero. As a result, the company eliminates the stress which may be caused by undesirable rate differences and saves funds to use them for other operations.
To start hedging, open a trading account with InstaForex Group which provides online services for currency trading on Forex.
If you wish to make your company’s money flow predictable and have a clear idea of the volume and period of your goods’ realization, then our specialists can open positions on the currency market for you; this will help you to avoid financial losses. If you have any questions related to hedging, please email us at firstname.lastname@example.org. Even if you have never hedged your assets before, we will clearly explain how to do it and develop the most appropriate hedging schemes for your business.
InstaForex je hlavný sponzor oficiálneho účastníka Dakar rally, InstaForex Loprais tímu. Zmluva bola podpísana v máji 2011 za Loprais team Alesom Lopraisom a za InstaForex Dmitrym Savchenkom. Bol to skvelý moment pre obe strany.Viac info
Svet profesionálneho motorizmu podobne ako finančný svet sa neustále vyvýja a zlepšuje poslednými technológiami každý deň. Toto sa deje aj s turbo motormi, KERS systémami, online obchodovaním takisto ako s PAMM a ForexCopy systémami. Dnes, šoferujeme elektrické autá a jednoducho vieme obchodovať na finančných trhoch.Viac info
World №1 broker gives its clients a unique opportunity to carry off the legendary luxury sports car! The campaign with Lamborghini Huracan as a main prize will be held from December 26, 2016 to December 20, 2019. Anyone who tops up their account with $1,000 or more and register for the campaign can compete for the posh car. The winner will be determined randomly with the help of Lamborghini-number, so all contenders have a chance to win.Viac info
Turnaj Muay Thai Kings of Muay Thai sponzorovaný spoločnosťou Instaforex sa konal v Grodno, Bielorusko 3. júna. The King of Muay Thai titul vyhral Andrei Kulebin, niekoľkonásobný svetový šampión.Viac info
Janko Tipsarevič je srbský tensiový hráč. V roku 2001 Janko zaznamenal prvý veľký úspech, keď vyhral juniorský Australian Open. V kontraste s mnohými talentmi, ktoré nikdy nezažiarili v dospelosti, Tipsarevič sa stal úspešným seniorským hráčom.Viac info
InstaForex podpísali kontrakt ČSA na umiestnenie loga spoločnosti na jendo z ich lietadiel. Každý deň je možnosť dosiahnuť top v obchodovaní na menovom trhu pre obchodníkov, ktoráí spolupracujú a obchodujú s Instaforex.Viac info