When to buy or not to buy – that is the question

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What in the world?

The volatility of the currency between 2016 and 2017 was something to behold. Similar movements were recorded between 2002 and 2003 and again between 2008 and 2009.  Sasfin Forex, established in 1987, was present in the market during these turbulent times and has garnered skills and solutions to assist clients with managing these fluctuations.

Forex providers are continuously asked by their clients “what is the currency doing?” and “what will the exchange rate be by next week?”  These are tough questions to ask and even tougher to answer.  Regardless, there are only two possible outcomes: the currency will move up and it will move down but not necessarily in that order. Correctly managing the highs and lows can set a business apart from its competitors.

Currency fluctuations will have different implications for importers and exporters.  As an importer, a weak exchange rate could have devastating financial implications on a business. On the other hand, exporters would have reaped the rewards during such times. At the end of the day, this all boils down to how a business costs its goods and how effectively the costing is locked in to ensure that the landed price is not eroded by currency fluctuations. An analysis conducted by Sasfin Forex over 72 quarters has indicated that a managed approach of combining Forward Exchange Contracts (FECs), with spot, will better the outcome, regardless of the volatility of the exchange rate.

The impact of socio-economic factors on the currency stretches from local to global. The South African landscape has recently seen major political unrest with regards to the moving and removing of Members of Parliament, corruption scandals and ratings downgrades, to name a few. Globally, the markets have reacted to President Trump’s provocation of the North Korean ‘rocket man’, the hurricanes in the US, the earthquake in Mexico and of course, the ongoing Brexit debate.

So what’s happening?

“Companies in South Africa and around the world face major challenges,” explains Roberto Rebuzzi, Head of Sasfin Forex. Slow economic growth, ratings downgrades, forex volatility and interest rate hikes are a few of the factors negatively impacting foreign markets.  Whether an importer or an exporter, businesses are constantly competing for markets where products and service offerings, underlying costs and foreign payment terms are sensitive to currency market movements, and where volatility can result in loss of competiveness, revenue and market share.  

Ultimately, all businesses aims to avoid profit margins eroding due to poor currency performance. Roberto further explains that “with the ongoing currency fluctuations, the need for experienced forex and treasury management teams has been recognised to ensure that businesses buy and sell currency at the optimum price”.

How can Sasfin Forex assist?

With an understanding of the operational risks and challenges businesses face across local and international borders, Sasfin Forex employs strategies that reduce businesses’ risks, while retaining the potential for clients to benefit from favourable trends in the market. Sasfin Forex specialises in buying and selling foreign currency, foreign currency risk management, interest rate risk management, cash management, cash forecasting and advanced reporting to assist businesses with their particular demands.

With the solutions and services provided to businesses, Sasfin Forex sees the challenges turning into opportunities by optimising forex exposures, focusing on cash forecasting and management, formulating and updating Risk Management Policies (hedging policies) and instilling a discipline. “Our clients have recognised the strategic value of selecting the best forex bank to partner with as an extension of their businesses because of the complexities of the numerous challenges in the market today,” concludes Roberto.  

Contact Sasfin Forex

Johannesburg – Head Office

Tel: +27 11 531 9240

Gregory.Garner@sasfin.com

Aletta.Mew@sasfin.com

 

Cape Town

Tel: +27 21 443 6866

Johann.delaPorte@sasfin.com

Rory.McCance-Price@sasfin.com

 

Durban

Tel: +27 31 271 8755

Gareth.Jones@sasfin.com