Import and Export Exchange Rate

The Foreign Exchange Currency market is the second largest financial market in terms of volume. The volatility in the currency market makes it a risky one. This Forex risk has become a key challenge for the treasury department. The currency rates fluctuate between the transaction date and cash flow date, and an unfavorable movement could compromise the profitability of the transaction. The effective ways to manage the Forex Money Management risk are – Check the Forex conversion rates offered by banks - online, newspapers, etc give delayed rates and not real time data. Banks charge high margins, leaving very little profits for small companies. In order to keep the focus on corporate finances, the Finance Manager may outsource the corporate Forex transactions. Regularly conduct training for existing finance team to get them up the curve to handle Forex transactions better with the ever changing market conditions. Have hedging strategies in place – through currency forwards, fu

While trading overseas there is a burden on a business cash flow along with delays and complications. One needs to keep a track of freight charges and tariffs to ensure there is no loss associated while trading overseas. Trade financing or import financing service specializes in overcoming these challenges and also spares the working capital for investing in the growing businesses. Trade finance Services helps to bridge the funding gap between a credit order and the payment to an overseas supplier. This eases the cash flow pressure. There are two types of credit facility to the importer – buyer’s credit and supplier’s credit. Buyer’s credit finance means finance for payment of imports arranged by the importer from a bank or a financial institution outside the country. The finance is based on a guarantee given by the importer’s bank. Supplier’s Credit has credit extended directly by the overseas supplier (exporter) to the buyer (importer) instead of a bank or a financial i

The need for forex risk management arises when traders who have open positions are willing to cut the size of their potential losses but alternatively there are also another set of traders who are willing to gain massively from single open position. The main aim of trading is to enjoy higher returns but it comes with higher risk.  The case is similar for corporate which have expected cash flows inwards or outwards depending on being an exporter or importer. If these cash flows are left un-hedged, the case is equivalent to trading. It is at this point there is need to understand what proper risk management is. Forex Risk Management Techniques can make the difference between survival and sudden death of a trader in the currency market. Even when best trading systems are in place, but no risk management strategies are there, failure would knock on your door sooner than later. These strategies can come in the form of cutting down on your lot size, entering the market at par

Buyer’s credit finance means finance for payment of imports arranged by the importer from a bank or a financial institution outside the country. The finance is based on a guarantee given by the importer’s bank. This credit facility may be extended either from an overseas branch of the domestic bank or an international bank in foreign country. This helps local importers to access cheaper foreign funds, close to cheaper LIBOR rates compared to local sourcing of funds. If one took a rupee loan, the rate is around 9-10 percent, but in buyer’s credit, the interest rate is around 2.5 percent.  Banks are permitted to approve trade credits up to USD 20 million per transaction for the imports permissible with maturity period up to one year from date of shipment. For import of capital good permissible under DGFT, bank may approve credit up to USD 20 million per import transaction for the imports with maturity period of more than one year upto five years from date of shipment for ind

The financial risk associated with foreign exchange is called Foreign exchange risk or currency risk. It is also called FX risk or exchange rate risk. The value of investment changes with the change in currency rate. The exposure to forex risk can affect organizations, big or small as it affects the assets and liabilities and hence the overall profitability. This also includes risk an investor would face while trading in the forex market, if there are open positions – long or short due to adverse exchange rate movement. With the forex market being a global one and functioning 24 hours – 5 days a week, this is likely to continue due to the socio-economic uncertainty. The different types of risk associated with foreign exchange can be divided into transactional, translational or economic risk. These broadly refer to Transactional risk – when a corporate deals with a foreign entity there is a forex risk arising due to difference in date of transaction and the final settlement

While trading overseas there is a burden on a business cash flow along with delays and complications. One needs to keep a track of freight charges and tariffs to ensure there is no loss associated while trading overseas.  Trade Financing or import financing specializes in overcoming these challenges and also spares the working capital for investing in the growing businesses. Trade Finance helps to bridge the funding gap between a credit order and the payment to an overseas supplier. This eases the cash flow pressure. There are two types of credit facility to the importer – buyer’s credit and supplier’s credit.  Buyer’s Credit finance means finance for payment of imports arranged by the importer from a bank or a financial institution outside the country. The finance is based on a guarantee given by the importer’s bank. This credit facility may be extended either from an overseas branch of the domestic bank or an international bank in foreign country.

Foreign currency exchange also abbreviating as Forex or FX is the conversion of currency of one country into another country’s currency.  In Foreign exchange markets, currencies are traded around the clock over the counter. Foreign exchange transactions are currencies exchanged by a traveler or by any corporate making payments to financial institutions and governments across the world. Transactions could be made by individuals, corporate or institutions. Importers and exporters or anyone taking speculative positions with no underlying goods or services all transact with currencies. The number of transactions has increased in the recent decades. Unlike equity and debt markets, the global Foreign Currency Exchange market is the largest and the most liquid financial market, having over trillions of dollars as average daily volumes. Foreign exchange transactions can be done for spot or forward delivery. They are executed over the counter (OTC) and around the clock and ther