Risk management strategies for currency hedging

At OFX, we offer a number of risk management strategies to help you get the most out of your money transfer. This is particularly important because the nature of foreign exchange is that the rates are always in flux, which can make them pretty unpredictable. With our risk management strategies, you can avoid the risks and uncertainties associated with adverse exchange rate movements.

Forward Contracts are often referred to when we’re talking about making an international money transfer, but what does it actually mean? And is it actually beneficial to look into setting one up to avoid risk? Here’s a brief overview:

Risk management for business

What is a Forward Contract?

A Forward Contract is an arrangement that allows you to transfer money at some time (up to 12 months in the future) at an exchange rate that you agree to now, so that you know what the exchange rate will be at the time the transaction takes place.

A Forward Contract may be beneficial for eligible business and individuals if exchange rates are particularly attractive now, and you want to lock in that rate to hedge against uncertainty in the future. This can be especially helpful for small businesses who want to keep their cash flows predictable when buying or selling overseas.

However, a Forward Contract precludes you from taking advantage of further beneficial movements, if your currency pair continues to move in a profitable way. To avoid missing out on further profitable movements, some people use a Forward Contract for a smaller portion of their total payment (say 50%) as a way to hedge against volatility.

At OFX, we offer a number of strategies to reduce your risk of market volatility and help you get a great rate wherever you are in the world.

With international money transfers comes potential market volatility. OFX can help you get the most out of your transfer and reduce your risk exposure with risk management strategies.

Protect against market volatility

Forward Exchange Contracts

At OFX, our Forward Exchange Contracts let you buy now, transfer later. This lets you lock in a great rate even if you aren’t ready to transfer your money immediately. Whether you need to book your transfer two days from now or a year from now, you’ll be protected against exchange rate fluctuations.

We can help you get a great rate, even when you're busy

Limit Orders

Target rate transfers (limit orders) is offered 24 hours a day, 5 days a week. This means that when you set that target, our currency experts will monitor it for you, and when it’s reached, we contact you to complete the transfer. This means that you don’t miss out if your target rate is reached overnight or while you’re out with family and friends. OFX is open 24/7 so you can always contact us to take advantage of market conditions.

Manage your risk with our strategies

FX Option

Our FX Option gives you the right, but not the obligation, to transfer at a certain time and rate at a later date, in exchange for a small, up-front premium. This protects you against adverse currency rate movements while also allowing you to take advantage if the rate moves in your favor. You can always check our website, use our app, or give us a call to settle on a solution that works best for you.

You can always use our Currency Converter or compare our Live Market Rates to check how your preferred currency is performing, or you can talk to one of our dedicated dealers to develop a currency strategy that’s right for you.

IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. UKForex Limited (trading as “OFX”) and its affiliates make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.

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