Forward Points Optimisation: How to reduce the cost of hedging
By Kantox
02/05/2023
Changes in global interest rates put the spotlight on the high cost of carry for businesses hedging the FX risk on assets denominated in currencies that trade at a forward discount and/or liabilities denominated in forward premium currencies.
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Key rule: with unfavourable forward points, delay hedge execution as much as possible with conditional FX orders
Conditional FX orders are orders to execute a spot or a forward transaction — but only when a predetermined limit is reached. In currency management, they are used in different ways:
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