Riding the currency waves

by Travelex Global Business Payments

Recent times have seen the Australian dollar continue its volatile run. During the month of October alone, the Aussie dollar traded in a 13 cent range from .9389 to 1.0752. This represents a swing of almost 15% in only a month, a significant loss for an importer or exporter caught on the wrong side of the equation.

Such currency volatility is likely to continue in the near future. The potential for default in Greece and Italy and the possibility of another recession in the US in 2012 continues to hover ominously over global markets fueling significant currency fluctuations.

If your business is engaged in international trade, you need to closely monitor movements in the Australian dollar and the impact currency variations can have on your bottom line. So what steps can you take to protect your business?

1. Understand your currency exposure and the potential implications for your business

In order to achieve this, you need to determine the exchange rate at which you can sell or buy goods and still remain profitable - your 'budget rate'. The frequency and currency of payments will also affect your exposure.

2. Consider various foreign exchange risk management strategies

These include the various traditional hedging products as well as natural hedging. For example, Travelex Global Business Payments provides customers with unique holding balances to manage natural hedges. With this feature you can 'net off' your inbound payments with your outbound payments, reducing the risks associated with unfavourable currency movements and the costs of multiple foreign currency transactions.

3. Create and execute the plan

There is no single 'best' product that works for all. A customised plan needs to be developed for your business that takes into account your foreign exchange exposure and risk tolerance. Once the approach has been decided upon, all you have to do is put the plan into action.

4. Continuously monitor the plan

This will ensure the plan keeps pace with the needs of your business as it grows and evolves over time.

An effective currency risk mitigation strategy can help your business' profitability over the longer term, allowing you to focus your energies on the day-to-day running of the businesses.

As a specialist foreign exchange provider, Travelex Global Business Payments has a long history of offering customised foreign exchange and international payment solutions to businesses. It also has an agreement with the Australian Government's Export Finance and Insurance Corporation through which it can offer eligible small business exporters access to additional credit facilities to facilitate hedging. For more information, please call 1800 730 400 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

*Conditions apply. Travelex GBP Australia Pty Ltd ABN 24 150 129 749 AFSL 404092 (Travelex) is the issuer of the financial products referred to in this communication. A Product Disclosure Statement is available for each of the financial products that Travelex issues and can be obtained by visiting http://www.travelex.com.au/product-disclosure-statement. Before you decide to acquire a financial product from Travelex you should read and consider the relevant Product Disclosure Statement.

Any advice provided above is general and does not take account of your financial situation, objectives or needs. Because of this before you act on it you should consider its appropriateness having regard to your own objectives, financial situations or needs. Before you decide to acquire a financial product from Travelex you should read and consider the relevant product disclosure statement which can be obtained at www.travelexbusiness.com/au.

Travelex is a registered trademark and is used by Travelex Global Business Payments Limited under license.

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