skip to Main Content

If you are a business that operates as an importer or an exporter, or maybe both, then you are going to need to ensure that you monitor foreign exchange (FX) fluctuations as they can have a big impact on your margins and profits. According to the Federation of Small Businesses, the United States (46%), Germany (38%) and France (36%) have been identified as the key target markets for UK based exporters and importers over next three years. As a result, this makes it particularly important to manage the effects of foreign currency movements.

One of the main risks for importers and exporters comes with buying goods and services in a country with a strong currency and then selling in a country with a weaker currency. Any significant movements in either direction could have severe implications for margins and profits.

Exchange Rates – What Influences Them?

If you want to protect your business against foreign exchange fluctuations then it is vital that you understand the factors that influence change. Therefore, you should actively track economic policies and data releases in those countries you utilise, and this would include interest rate changes and any alterations to the government. Along with this, increases in inflation and economic growth can also play a part. It is also imperative that activity at home is also monitored such as debt levels or interest rate changes.

Therefore, it can help to remember a simple rule whereby a strong pound is more favourable for importers while a weak pound benefit’s exporters. However, if you are dealing in both, then you need to make sure you identify the right balance.

Making Vital Payment Decisions

One of the key aspects of reducing the risk of foreign exchange fluctuations is how you make international payments and how you’re paid. An importer will need to determine if there are any products that can assist with managing their FX exposure, such as being able fix an exchange rate when purchasing from a supplier at a future forward date (Forward Contract), or immediately when the time comes to pay them (Spot Rate). For a UK exporter, they would need to decide if they will charge for goods in Pound Sterling or in the currency where the goods are being sent, and then managing the currency conversion locally.

Foreign Exchange Management

Once you have enhanced your knowledge on FX fluctuations and have implemented your payables and receivables, you will then need to identify a way of managing the currency conversion that works best.

You will need to:

  • Seek out the right methods that enable you to mitigate FX movements
  • Implement your chosen methods to every market that you trade with
  • Identify the targeted rates or your aims for exchanging currencies
  • Continually review your strategy to manage changes in market conditions.

It does not matter whether you are new to trading with other countries, or you are an established business that has been doing this for some time, Newbridge Foreign Exchange can help you. With the help of our team of experts, we can assist and support you in managing international transactions to maximise your margins, and reduce the risks involved in the currency markets.

Implementing Hedging Where Required

Importing or exporting comes with risks, and naturally you are going to need to do all you can to reduce these risks, as that can help you to minimise losses. It is possible to enter into financial contracts that protect from sudden changes in currency exchange rates, regardless of whether they are expected or unexpected, and these are known as hedging strategies.

The products we offer such as spot trading, booking forward contracts and limit orders are all part of the available hedging strategies open to you. Spot trading will involve the purchase or sale of a foreign currency on the spot. While forward contracts focus on fixing the exchange rate before settling at a later date. Further information on our products and services can be found here.

Business & Personal Services

Importers and Exporters – Managing Foreign Exchange Fluctuations

If you are a business that operates as an importer or an exporter, or maybe both, then you are…

Buying or Selling an Overseas Business

If you are considering buying or selling an overseas business, then it is crucial that you gain an understanding…

Processing international payroll

As the world has become a smaller place, it is now common for businesses to pay employees who are…

Repatriating overseas earnings

Whether you are an individual who has been working overseas or you are a business located overseas, there is…

General Business Payments Abroad

Many businesses have a desire to move into new markets as they look to expand, and this causes many…

Purchasing or selling a property overseas

Whether you are thinking of purchasing or selling property overseas, it’s important to understand that the process is different…

Retiring Abroad

If you’re retiring abroad, you’re probably looking forward to relaxing in the sun or exploring new places. However, moving…

Emigrating Overseas

Moving to a new country can seem daunting and it requires planning but you’ll also need to consider your…

Purchasing and Selling Foreign Investments

Purchasing or selling foreign investments overseas requires you to be abreast of the latest foreign exchange development and movements.…

Relocating for Work

If you’re relocating for work, you’re likely to be embarking on a new adventure but there’s a lot to…

Spot Contracts

A spot contract is one of the most common foreign exchange products used to sell one currency and buy…

Forward Contracts
Forward contracts allows you to secure an exchange rate today, but for settlement at a specific date in the future.
Market Orders

The currency markets are very volatile but it is possible to secure an exchange rate above the current market…

Rate Alerts

Transferring money internationally can become quite complex, especially when it comes to fluctuations between various currencies. Exchange rates change…