Protection against transaction risks

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Factors to consider before deciding to protect transaction exposure

The factors may include the following:

  • Future exchange rate movement.

    The future movements in exchange rate may depend on a number of factors including interest rate, inflation, central bank actions and economic growth.

  • The cost involved in the hedging, eg commission.

  • The ability of the company to absorb foreign exchange losses.

  • Expertise within the company.

  • The company’s attitude towards foreign currency transactions and the importance of overseas trading.

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