Foreign Exchange for Business Trading

Situation

An electronics firm based in the UK imports a number of it's components from the Far East. Due to lead times the company needs to plan ahead and place orders weeks, sometimes months, in advance.

Due to the large scale of the companies operation the costs involved with these orders are high and fluctuating exchange rates can substantially impact their bottom line.

The company needs to find a solution that allows them to accurately forecast the costs of orders and therefore set prices for their finished products.

Solution

Currencies Direct offer forward contracts that let clients lock in a rate of exchange in advance for delivery of funds on a future date. Once a rate is secured, the settlement currency equivalent is fixed for the duration of the contract, thereby protecting profits from erosion. Because rates can be locked in up to two years in advance, companies can monitor the market for favourable rates and secure funds for upcoming needs.

Outcome

By utilising the forward contract service offered by Currencies Direct the electronics firm is able to lock in a rate when they initially place their order in the Far East thereby enabling them to know exactly how much the total cost of the order will be. This allows them to more accurately forecast budgets, profit margins and price lists.