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Adam Solomon is a specialist in business foreign exchange issues at foreign exchange brokers TORfx.

The idea of this blog is to assist businesses in saving money on making or receiving payments in foreign currency. It is developed with all companies in mind from public companies with large and complex operations, to smaller companies and individuals.

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Home Opinion Business Foreign Exchange - Adam Solomon A falling sterling and businesses
A falling sterling and businesses PDF Print E-mail
Written by Adam Solomon at TORfx   
Wednesday, 10 March 2010 15:28
Adam Solomon at business foreign exchange rate brokers TORfx says business clients would do well to hedge their currency positions while the sterling remains volatile.


How are business clients reacting to the falling sterling ?


A number of our corporate clients have called in expressing concern over the prospect of another currency crisis engulfing the Pound. Of course, it's election year and the latest polls seem to indicate we're nudging towards the first minority government since 1974.

A hung parliament would make it very difficult for officials to tackle the widening budget deficit, currently at the same level as Greece in terms of the percentage of GDP. In addition, the Bank of England may return to quantitative easing at some stage this year to cement the economic recovery, which hasn't been particularly strong so far. The Pound has fallen almost 7% against the Dollar since the turn of the year and a company purchasing Dollars may have budgeted at a certain rate last year would be incredibly concerned over the prospect of further losses. As a result, a number of our corporate clients have been looking for some insight into the prospects of a recovery and we have provided a 12-month forecast on Sterling to help them meet their expectations.

How should businesses approach hedging / forward contracts on currency?


Many of our corporate clients prefer to lock into forward contracts on currency purchases, (hedging foreign currency) principally because they can secure the same rate of exchange for their entire annual requirement and can budget other areas of the business with greater ease. We only require 10% on booking a forward contract with the remaining balance payable on the forward date selected.

With interest rates at a record low globally, forward buying has become a much more attractive option for our clients because the rate of exchange is almost exactly the same as trading on a spot basis. The client can deal up to 2-years ahead for a specified date, at a guaranteed rate of exchange.

Which trading partner is TORfx most involved in from a business perspective?


Without going into names, our trading partners vary from sole traders importing small amounts of clothing from the Phillipines right up to multinational household name corporate clients moving millions a month.

TorFX also has set up partnerships and affiliations with a number of businesses in the UK and abroad, including one of the largest banking partners in the Pacific, one of the UK's largest international removals firms and the worlds largest real estate company. In addition we work very closely with wealth manangement advisers and private equity firms who introduce trading partners to us.
Last Updated ( Wednesday, 24 March 2010 11:06 )