The origin of the foreign exchange market in India could be traced to the year 1978 when banks in India were permitted to undertake inter-day trade in foreign exchange. After 1990s India has seen a rapid expansion of foreign exchange market in terms of participants, transaction volumes, the decline in transaction costs and more efficient mechanisms of risk transfer.
Foreign exchange risk (also known as exchange rate risk or currency risk) is a financial risk caused by exposure to abrupt changes in the exchange rate between two currencies. In other words, it is the possible direct loss (as a result of an unhedged exposure) or indirect loss in firm’s cash flows, assets, net profit, liabilities, and in turn its stock market value from an exchange rate fluctuation.
To manage the exchange rate risk inherent in multinational firms’ operations, a firm needs to determine the specific type of current risk exposure, the hedging strategy and the available instruments to deal with these currency risks.
Management of forex risk can be divided into internal and external techniques. Internal techniques are part of the firms' regulatory financial management such as leads and lags, cross-hedging, currency diversification, risk sharing, pricing of transactions, parallel loans, currency swaps and matching of cash flows. These services broadly do not require a contractual relationship with any party outside the firm for advisory. On the other hand, external techniques involve contractual relationships with external parties for advisory for the purpose of the forward market hedge, hedging through currency futures, options and money market hedge.
There are over ten thousand forex advisory services firms in India. Furthermore, with the shift in the world towards technology, today we have robot expert advisors as well. Broadly the services provided by forex firms can be divided into assistance on existing hedges, risk management training, independent hedging advice, fundamental and technical outlook reports, advisory on meeting corporate objectives, advisor dedicated to a particular firm, drafting customized forex hedging plan, and checking the rates.
If you have confidence in your forex advisor, you will be able to devote more time and attention to analysis and development in business as a whole. A bit of research before committing to any advisor goes a long way and can increase your odds of success in the competitive forex market.
These are the considerations when choosing a forex advisor in today's competitive forex marketplace. Firstly the forex advisor must be legally regulated and zero fraudulence. A forex advisory provider makes money through commissions and spreads, thereby try to keep them minimal. Finally look for the best customer service provider with absolute convenience, flexibility, responsiveness and most importantly accuracy.
Myforexeye is India’s first full-service forex service provider that is it is the one stop shop for all foreign exchange products and services. Forex markets are extremely unpredictable and insanely volatile. Managing forex risk requires regular monitoring of the forex markets, a lot of experience and patience. The forex advisory team at Myforexeye has decades of experience in forex risk management. It provides all the services essential to a customer at hand to manage risk. The Myforexeye team provides market intelligence and industry best practices to its clients to manage their forex risk more effectively.
Read more about Foreign Exchange & Risk Management
17 Aug 2019 10:55 AM
Foreign Exchange reserve is an essential component of any Nation's economy health in balance and for India which is an import driven country, it helps keep GDP level...
13 Aug 2019 04:17 PM
Popular Hedging tools used by forex experts to mitigate currency risks include currency options, futures, forward, swaps. Options and futures differ from one another.
08 Aug 2019 06:07 PM
In the area of forex services buying and selling, it involves unpredictable risks due to the volatility of the forex market. Before making any transaction, the Forex experts generally make use of the signal system in order to make any decisions.
06 Aug 2019 03:10 PM
The foreign exchange market is a truly global market. So even if there is a slightest movement in the geopolitical and economic factors, it is bound to directly affect the rate of currencies.
01 Aug 2019 05:35 PM
Forward contract is one of the most straight forward currency hedging methods. They are basically traded “over the counter” (OTC) between two parties, rather than through a public derivatives exchange.
30 Jul 2019 04:41 PM
Just as high rate of inflation negatively impacts the currency exchange rate, similarly, prolonged low rate of inflation also does not guarantee a favourable exchange rate.