International Finance
July - August 2018 Magazine Smart Tips

Top 5 tips for hedging strategies

Rehan Ansari, head of currency hedging at Caxton FX gives us his top five forex tips

If your company trades overseas, you need a reliable FX partner. A clever strategy not only protects against risk, it can save thousands on every deal. Follow Caxton’s top tips and make currency work for you.

  1. Identify your total FX exposure. Are your needs ad hoc or can they can be forecasted? How many payments do you make to your suppliers? What do those transfers cost?  Remember, not all costs are visible, so once you have identified them all –  you can work on those savings.
  2. Learn how margins and cash flow expose you to currency risk, and the products which can mitigate those risks. When fixing the exchange rate for your foreign market sales you should factor in a ‘currency exchange buffer’. This should be both competitive but remain profitable for your business. Beware; it’s essential to protect your budget rate to stop your costs eating into your profit margins.
  3. Create a strategy that fits your needs – and use all the right tools on offer. This means rate watches, limit orders, spot transactions, forward contracts and derivatives. Decide on a static, rolling, layered or dynamic programme. Remember, a bespoke formula will enhance your cashflow. 
  4. Roll out your strategy. Now you know all about the products to hedge your exposure. Recent economic uncertainty has created market volatility. Caxton says, ‘if you’re not hedging, you’re spending’.
  5. Analyse your strategy regularly. Keep track of currency changes and minimise exposure. Watch your ‘Procure to Pay cycle’ – make sure it fits in line with your invoice payments

Get started. Caxton’s dedicated experts are at the end of a phone with free advice. Our decades of experience will guide you through all of the above. Book your free consultation with our Head of Options on + 44 (0) 207 201 0560.

About Rehan Ansari:

Rehan Ansari
Rehan Ansari

Rehan Ansari heads the Currency Hedging desk at Caxton FX. With over 20 years’ experience in the financial markets covering different sectors. He started as an Oil Broker working with traders on the International Petroleum Exchange (IPE). After passing regulatory exams as a Futures and Options Representative he joined the FX desk at a financial brokerage as Currency Options expert. Alongside derivatives he also acted as Market Maker and Trader in Spot FX and Precious Metals to a range of clients from hedge funds to institutional investors. Since 2012, Rehan has been creating currency hedging strategies for SME’s through to blue chip companies using derivative products from Options and Non-Deliverable Forwards (NDF) to Currency Swaps. He has a proven track record in volatile environments and is authorised by the Financial Conduct Authority

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