FOREIGN EXCHANGE SOLUTIONS

Avoiding market surprises




MOST OF US LIKE SURPRISES. HOWEVER, THERE IS A DIFFERENCE BETWEEN THE JOY THAT CREEPS ACROSS THE FACE OF A CHILD ON CHRISTMAS MORNING AND THE REALISATION THAT ADVERSE FOREIGN EXCHANGE MOVEMENTS HAVE RENDERED A FORWARD DATED CURRENCY LIABILITY UNECONOMIC.

With the future trading relationship between the EU & the UK still very much up in the air and the growing trade tensions emanating from the Trump administration, you could be forgiven for choosing to withdraw completely from any foreign exchange commitments. However, Weatherbys Bank has a range of foreign exchange solutions to help you navigate through choppy waters.

If your concerns revolve around the creation of certainty in future dated cashflows, then this can be achieved through forward outright exchanges. Forward outright rates are derived from an adjustment to the prevailing market rate (+/-), based on the interest rate differentials between the two currencies concerned. Whilst the certainty of a fixed exchange rate will suit some, the commitment it represents and the inability to take advantage of what might be more preferential rates at maturity, will be viewed as a disadvantage by others.

Time options are essentially the same as forward outright trades, but offer greater flexibility around when you actually exchange your funds. These have proved popular amongst clients who receive payments under the RPA Basic Payment Scheme. With payments typically made between December and June of the following year (and sometimes delayed beyond that), the flexibility to fix an exchange rate across the entire window of dates has proved invaluable to those engaged in the agricultural sector.

The Bank can also facilitate options contracts, providing an effective backstop against unwanted foreign exchange pricing movements. Options come with an upfront non-refundable premium attached, giving the option buyer ‘the right but not the obligation’ to trade at a pre-agreed exchange rate. This product has proved popular amongst clients with ‘big ticket’ payments due in the future, such as high value nomination fees within the bloodstock breeding industry.

The information provided is general in nature and does not constitute financial advice, investment advice or trading advice.  Issued by Weatherbys Private Bank, authorised and regulated by the Financial Conduct Authority.

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The foreign exchange team would be happy to discuss your individual requirements, providing indicative quotes tailored to your specific circumstances.