A country’s economic health is gauged by several factors including gross domestic product, its export and import growth as is indicated by current account or fiscal surplus/deficit, which is a difference in government’s revenue and expenses. Every time the economics of a nation change, the foreign exchange, which is the value of a local currency vis-à-vis a base currency, also changes. The outlook of an economy causes changes in the sentiments and thus causes volatility in the Financial Markets. This causes an increase in the foreign exchange risk. There are several factors which affect the change in foreign exchange rates and increase the currency risk. The foreign exchange markets see a direct impact of the following –
Foreign exchange risk increases due to
At all times, the above factors influence the foreign exchange rate and the foreign exchange risk also goes up or down accordingly. Sometimes these factors are interlinked making the impact on the foreign exchange rate deeper and thus associating with Forex Experts would help in understanding the impact of each factor. The management of foreign exchange risk will help in right costing and quoting for better growth of the company.
Thus to mitigate the currency risk, one needs to stay tuned to market happening as and when they happen. In the fast age of technology, it is important to stay abreast of all latest events and economic calendar which would assist in hedging one’s forex portfolio appropriately. Forex news and research report to know the action as it happens. Foreign exchange market is the most volatile and highly fluctuating market amongst the financial markets and one should manage the foreign exchange risk in order to safeguard their benchmarks in order to protect their profits.
11 Aug 2020 07:01 PM
Currency trading, often referred to as foreign exchange or Forex, is the purchase and sale of currencies in the foreign exchange market, with the objective of making profits.
21 Jul 2020 06:13 PM
A country’s exchange rate and its imports and exports hold a complicated relationship as there is a constant feedback circuit between the way a country’s currency is valued and the international trade.
29 Jun 2020 05:35 PM
Dynamic hedging is a foreign exchange risk management strategy that allows businesses and individuals to readapt their hedging positions to evolving market conditions by providing flexible solutions to protect investments from exchange rate risks.
19 Jun 2020 05:01 PM
Management of Currency Exchange Risk is of paramount importance during turbulent times, like this pandemic. The currency fluctuations are very volatile and cannot be predicted as the circumstances are uncertain.
06 Jun 2020 03:59 PM
Outrights, in FX markets refer to the type of transactions where two parties agree to buy or sell a given amount of currency at a predetermined rate, on a specified date in future.
08 May 2020 05:21 PM
Converting one exchange rate into another at a particular price makes transferring rates. Ideally all nations should be treated as equal and there shouldn’t be any exchange rate applicable which would mean to have a universal currency.