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Exchange Rate Warning
MY BUSINESS Magazine, June 2005Use forward hedging methods to lock in current high Australian dollar rates or risk suffering dramatically weaker rates later in the year – that’s the message from Australian online foreign exchange services provider, OzForex.
“A much mooted turnaround in the US economy in the latter half of 2005, if it comes to fruition, will cause a strengthening of the US dollar and will see the Aussie dollar give back some of the gains it has made over the past few months,” warns OzForex’s corporate business manager, Andrew Porter.
OzForex claims big rate changes over 2004 may have caused unsuspecting companies to lose thousands of dollars. For example, if a company that had payment of US$100,000 to make to a supplier on 17 June 2004 had brought the US dollar at the lowest possible spot rate on that day, it would have cost them A$147,667.
However, if they had entered into a forward contract earlier in the year (say on 18 February 2004) then the cost of the transaction in June would have been A$124,953 – a difference of A$22,714.
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