Our Articles

Enjoy,comment and share

RSS World Trade Organization — Latest news

  • Items proposed for consideration at the next meeting of Dispute Settlement Body January 25, 2022
    The WTO Secretariat has circulated a meeting notice and list of items proposed for the next meeting, on 25 January 2022, of the Dispute Settlement Body, which consists of all WTO members and oversees legal disputes among them. The meeting notice is circulated in the form of a document officially called an “airgram”.
    WTO
  • Deadline extended to submit Aid-for-Trade questionnaires for 2022 Global Review January 21, 2022
    As part of the Aid-for-Trade Monitoring and Evaluation exercise, WTO members, observers and their development partners are invited to submit their self-assessment questionnaires by 31 January 2022. Their responses will be analysed by the WTO Secretariat and presented at the upcoming Aid for Trade Global Review later in the year.
    WTO
  • DG Okonjo-Iweala calls on ministers to step up negotiating efforts, harvest outcomes January 21, 2022
    Director-General Ngozi Okonjo-Iweala on 21 January called on ministers from a cross-section of WTO members to push ahead in all ongoing negotiations, and work with “pragmatism, creativity, and flexibility” to harvest agreements as and when they are within reach. Ministers broadly accepted her suggestion to accelerate work, both in Geneva and in capitals, so WTO […]
    WTO
  • Tenth China Round Table looks at impact of 10 years of China Programme on LDC accessions January 20, 2022
    The Tenth China Round Table on WTO Accessions, held virtually on 18-20 January, celebrated 10 years of the China Programme, with participants reflecting on its impact on the accession of least-developed countries (LDCs) and discussing the future direction of this initiative. The event also provided an opportunity for trade experts to present a study reviewing […]
    WTO

Currency Risk Management



 

 

International Trade transactions could generate a currency risk exposure. This is especially so when an Exporter accepts to be paid in a foreign currency. Indeed, since the time span between the sales contract is signed and the payment is made, could take several weeks or months, the foreign currency is likely to fluctuate in the meantime and impact (favourably or adversely) the final amount received by the Seller when currency exchange has been translated in the domestic currency.

In much the same way, an Importer who accepts to pay a given amount denominated in a foreign currency is exposed to currency adverse movements.

In short, we can see that the seller and the buyer have conflicting interests, since the Exporter is exposed to the depreciation of the foreign currency that he will receive, while the Importer is exposed to the appreciation of the foreign currency in which he must honour a payment.

One way to get around this problem could be to require an upfront payment in the local currency. However it goes without saying that this option is somehow business-unfriendly, to say the least. In addition, granting extended payment terms might be the only way to conquer new markets.

Fortunately, this risk can be managed by using the appropriate hedging solution.

Overall, two types of hedging tools are available in International trade: Internal and External hedging techniques.

 

Please click on the links below for a detailed explanation of each technique