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  • WTO issues 2020 Annual Report May 28, 2020
    The WTO’s Annual Report, published today (28 May), provides a comprehensive account of the organization’s activities in 2019 and early 2020. The Report opens with a message from Director-General Roberto Azevêdo and a brief overview of the year. This is followed by in-depth accounts of the WTO’s main areas of activity over the past 12 […]
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  • 2020 WTO Public Forum cancelled May 28, 2020
    After careful consideration of COVID-19 related uncertainties and health concerns, the WTO has decided to cancel this year’s WTO Public Forum, scheduled for 29 September to 2 October. This decision responds to the complexities around planning to host thousands of people from around the world for a public event under the WTO roof, as well […]
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  • DDG Wolff: This is the time to consider the future of the multilateral trading system May 27, 2020
    The outbreak of the COVID-19 pandemic has heightened the urgent need to examine the underlying principles and values of the WTO and whether the organization needs change, Deputy Director-General Alan Wolff said on 27 May. Speaking at a webinar hosted by the Korean International Trade Association, DDG Wolff called for immediate action to control the […]
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  • Members discuss impact of COVID-19 on developing economies’ participation in world trade May 26, 2020
    On 26 May, WTO members assessed the impact of the COVID-19 pandemic on the trading capacity of developing countries in a virtual meeting of the Committee on Trade and Development. The new chair, Afghanistan’s WTO Ambassador, Mohammad Qurban Haqjo, said: “Trade must form part of the solution in assisting and supporting recovery in developing countries.”
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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