Currency Hedging – The Solution for Your Currency Risk

We have been offering special products for export houses where we structure your currency hedges and help you disinter mediate your banks. That is because when you hedge with a bank, you end up paying very hefty hidden price for it. Typically our products increase your converted rupee revenues by 5 – 10 % a year without taking any directional bias on the movement of the currency. Our currency hedging products are wide and cover a broad range of requirements.

For importers or corporate who have exposure to dollars and are required to make payments in dollar, at a future date, we can bring down your cost of forward hedging significantly. Generally speaking, a bank can charge you anywhere between 7 – 8.5% for a one year forward, typically we can bring down your cost of these forwards by 35 – 50% using our Alpha Hedging Products.

Now What is Currency Hedging?

Currency hedging is similar to buying insurance. When you hedge, you are trying to protect yourself against a potential loss. Covering, the foreign exchange risk due to unfavourable change in exchange rates, is termed as hedging the currency risk.

In general, any hedging strategy is understood to help insulate the investor from the occurrence of events that could threaten to cause a deal to lose money. When it comes to currency hedging, the idea is to convert or exchange the currency while the rate of exchange is favorable, and then make the investment with currency that is native to the country of origin where the investment is bas

Benefits of Currency Hedging

Currency hedging is similar to buying insurance. When you hedge, you are trying to protect yourself against a potential loss. Covering, the foreign exchange risk due to unfavourable change in exchange rates, is termed as hedging the currency risk.

In general, any hedging strategy is understood to help insulate the investor from the occurrence of events that could threaten to cause a deal to lose money. When it comes to currency hedging, the idea is to convert or exchange the currency while the rate of exchange is favorable, and then make the investment with currency that is native to the country of origin where the investment is bas

Let’s have a look on some of its advantages:

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Survive Hard Market Period

Hedging enables traders to survive hard market periods. Since the objective of hedging currencies is to minimize losses, it can also allow traders to survive economic downturns, or bearish market periods. If you are a successful hedger, you will be protected against inflation, interest rate changes, commodity price volatility and currency exchange rate fluctuations

Reduce Risk & Losses

The main advantage of this investment approach is to help reduce the risks and losses of the investor. Hedging is a good strategy when dealing with foreign investment opportunities. The price of currencies are volatile, however, hedging currencies can provide investors with more leverage when they put money in the very risky Forex market.

Locking Profit

Hedging tools can also be used for locking the profit. Investors who do not have the time to monitor and check their investments can also benefit from hedging. There are many hedging tools that can effectively lock profits for investors. The gains from hedging are often realised in long term gains.

Some interesting facts about currency hedging:

An exporter can potentially increase his net revenues by 7% via currency hedging structures
In case of an importer, your cost of hedging can be as low as “zero percent”. In 2012-13, the total profit for 10 NSE listed companies was 24.7 billion Rupees out of which 3.3 billion Rupees were from currency hedging.

Differential in interest rates helps you in enhancing your revenues. Considering this fact if someone would have hedged currency in 2007 at 39, he would still have not lost money despite Rupee hitting its worst levels in the past 1 decade. Funding: Our foremost priority is to partner our clients – Relationship underpinned by transparency and shared values

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