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  • Japan initiates WTO dispute complaint against Chinese steel duties June 15, 2021
    Japan has requested WTO dispute consultations with China concerning anti-dumping measures imposed by China on certain stainless steel products from Japan. The request was circulated to WTO members on 15 June.
    WTO
  • EU donates EUR 1 million to enhance developing countries’ negotiating skill-set June 15, 2021
    The European Union has contributed EUR 1 million (just over CHF 1 million) over the period 2021-2022 to help developing countries and least-developed countries (LDCs) participate effectively in global trade negotiations. This donation to the WTO’s Global Trust Fund will finance training and other capacity-building activities for government officials to help them better understand and […]
    WTO
  • DG Okonjo-Iweala welcomes resolution in US-EU aircraft subsidy disputes June 15, 2021
    Director-General Ngozi Okonjo-Iweala issued a statement on 15 June in response to the announcement by the European Union and the United States regarding their WTO disputes over subsidies for large civil aircraft.
    WTO
  • WTO members urged to hasten towards fisheries subsidies compromise in stocktaking meeting June 14, 2021
    WTO negotiations on fisheries subsidies have progressed ahead of the 15 July meeting of ministers, but gaps remain and much is left to be done to secure an agreement, Dr Ngozi Okonjo-Iweala, Director-General, told heads of delegations on 14 June. Members would do well to demonstrate flexibility in the coming meetings as work continues to […]
    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