Our FX insights from January
Hello from FX Markets,
In January, we saw corporates look to innovative options of hedging strategies amid ongoing interest rate uncertainty, while several multinational brands also reported falling victim to the Argentine peso's recent devaluations.
Options becoming appealing for corps
The possibility of interest rate reductions in the US has prompted several corporate treasurers to explore more innovative approaches to their FX hedging strategies. With expectations for higher hedge ratios, a number of companies are starting to consider structured forwards and options-based currency baskets. This is seen as a more adaptable and cost-effective option compared to their standard FX forwards and swaps hedges.
Dealers bemoan new platform costs
The surge of spot FX trading platforms emerging in the last two years is beginning to impact the dealers who are prompted to join these platforms due to customer demands. Liquidity providers though say integrating with these platforms is challenging, and the continuous appearance of new vendors could become too overwhelming for some to manage effectively.
Argentina peso losses rocket
Companies including Adidas, Citi, Halliburton and Sherwin-Williams are among the names that have suffered from the Argentine peso’s devaluations costing them around $3.3 billion. The losses were amplified due to a lack of practical hedging options for the currency, and traders say there was little that firms could have done to mitigate the effects of its slide.
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FX Markets Leaders: Primary Colours, May 2024
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Explore our full events schedule for 2024 here.
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FX Markets
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