Nothing can send shockwaves rippling through a business that imports or exports goods or services like sudden currency movements, writes Gregory Garner Head: Foreign Exchange, Access Bank Plc.
Within minutes, a profitable deal can turn a loss, through no action of your own. It is impossible to do projections or do budgets when you are relying on a stable currency, and get the opposite.
The ZAR is one of the most volatile currencies in the world now. As we saw in 2021, it moved between a low of 13:41/USD to high of 16:36/USD; 16:31/EUR to 19:01/EUR; and 18:95/GBP to 21:76/GBP; which is a 22%, 17% and 10% move respectively.
Economists predict that 2022 will be no different, so currency-dependent businesses need to do what they can to protect themselves.
Access Bank Plc works with businesses of all sizes across many industries and offers its foreign exchange clients a variety of products and solutions to buy and sell foreign exchange.
One of the most common questions we are asked at Access Bank is, “How to we protect our business against currency volatility?” One product we suggest is a forward exchange contract, more commonly referred to in the financial services industry as an FEC.
An FEC provides a business with a sense of stability in the fact that a specific exchange rate has been locked in now for a payment due in the future. This ensures invaluable peace of mind, as it essentially protects the underlying profit in the goods being sold or bought, regardless of what happens to the exchange rate in the future.
So how does it work? Firstly, you must ensure you have the FEC facility set up on your banking profile. If you don’t, contact a Relationship Manager who will take the necessary steps to provide one.
Once you have an FEC facility, you contact a foreign exchange Direct Dealing Room at Access Bank and specify the currency or currencies you would like to exchange. You select a date on which to send this transfer, and the amount that would be expected to be transferred.
Two days before the maturity date of the FEC – the day that you wish to transfer the money – an Access Bank representative will contact you to confirm payment instructions and request the necessary supporting documentation to ensure smooth transfer of funds.
Here is an example: a South African company wishing to purchase stock in USD, who enters into the FEC for 90 days (three months). The spot rate is R15.50/$, the US interest rate is 0.25% and the South Africa’s interest rate in 3,75%.
The difference in interest rate is therefore 3,75% – 0,25% = 3,5%. Using the 365-day convention, one would multiply the difference in interest rates by 90 days: 3,5% x (90/365) = R0.19* (rounded for simplicity), then add the forward points to the spot rate to determine the forward rate: R15,50 + R0,19 = R15,69.
This would be the rate fixed for the 90 day future date, regardless of any market volatility.
If you are interested in learning more about foreign exchange, FECs or any other products Access Bank Plc offers, please contact us. Our foreign exchange relationship managers will guide you through the process, step by step, ensuring your peace of mind for this and future financial processes.
Written by: Gregory Garner Head: Foreign Exchange
Cookie | Duration | Description |
---|---|---|
__hssrc | session | This cookie is set by Hubspot. According to their documentation, whenever HubSpot changes the session cookie, this cookie is also set to determine if the visitor has restarted their browser. If this cookie does not exist when HubSpot manages cookies, it is considered a new session. |
cookielawinfo-checkbox-advertisement | 1 year | The cookie is set to record the user consent for the cookies in the category "Advertisement". |
cookielawinfo-checkbox-analytics | 11 months | This cookie is set to store the user consent for the cookies in the category "Analytics". |
cookielawinfo-checkbox-functional | 11 months | The cookie is set to record the user consent for the cookies in the category "Functional". |
cookielawinfo-checkbox-necessary | 11 months | This cookie is set to store the user consent for the cookies in the category "Necessary". |
cookielawinfo-checkbox-others | 11 months | This cookie is set to store the user consent for the cookies in the category "Other. |
cookielawinfo-checkbox-performance | 11 months | This cookie is set to store the user consent for the cookies in the category "Performance". |
viewed_cookie_policy | 11 months | The cookie is set to store whether or not user has consented to the use of cookies. It does not store any personal data. |
Cookie | Duration | Description |
---|---|---|
__hssc | 30 minutes | This cookie is set by HubSpot. The purpose of the cookie is to keep track of sessions. This is used to determine if HubSpot should increment the session number and timestamps in the __hstc cookie. It contains the domain, viewCount (increments each pageView in a session), and session start timestamp. |
bcookie | 2 years | This cookie is set by linkedIn. The purpose of the cookie is to enable LinkedIn functionalities on the page. |
lang | session | This cookie is used to store the language preferences of a user to serve up content in that stored language the next time user visit the website. |
lidc | 1 day | This cookie is set by LinkedIn and used for routing. |
Cookie | Duration | Description |
---|---|---|
__hstc | 1 year 24 days | This cookie is set by Hubspot and is used for tracking visitors. It contains the domain, utk, initial timestamp (first visit), last timestamp (last visit), current timestamp (this visit), and session number (increments for each subsequent session). |
_ga | 2 years | This cookie is installed by Google Analytics. The cookie is used to calculate visitor, session, campaign data and keep track of site usage for the site's analytics report. The cookies store information anonymously and assign a randomly generated number to identify unique visitors. |
_ga_7830NTLLXS | 2 years | This cookie is installed by Google Analytics. |
_ga_8FT0WQ6XG7 | 2 years | This cookie is installed by Google Analytics. |
_gat_UA-199321007-1 | 1 minute | This is a pattern type cookie set by Google Analytics, where the pattern element on the name contains the unique identity number of the account or website it relates to. It appears to be a variation of the _gat cookie which is used to limit the amount of data recorded by Google on high traffic volume websites. |
_gcl_au | 3 months | This cookie is used by Google Analytics to understand user interaction with the website. |
_gid | 1 day | This cookie is installed by Google Analytics. The cookie is used to store information of how visitors use a website and helps in creating an analytics report of how the website is doing. The data collected including the number visitors, the source where they have come from, and the pages visted in an anonymous form. |
hubspotutk | 1 year 24 days | This cookie is used by HubSpot to keep track of the visitors to the website. This cookie is passed to Hubspot on form submission and used when deduplicating contacts. |
Cookie | Duration | Description |
---|---|---|
_fbp | 3 months | This cookie is set by Facebook to deliver advertisement when they are on Facebook or a digital platform powered by Facebook advertising after visiting this website. |
bscookie | 2 years | This cookie is a browser ID cookie set by Linked share Buttons and ad tags. |
fr | 3 months | The cookie is set by Facebook to show relevant advertisments to the users and measure and improve the advertisements. The cookie also tracks the behavior of the user across the web on sites that have Facebook pixel or Facebook social plugin. |
IDE | 1 year 24 days | Used by Google DoubleClick and stores information about how the user uses the website and any other advertisement before visiting the website. This is used to present users with ads that are relevant to them according to the user profile. |
test_cookie | 15 minutes | This cookie is set by doubleclick.net. The purpose of the cookie is to determine if the user's browser supports cookies. |
VISITOR_INFO1_LIVE | 5 months 27 days | This cookie is set by Youtube. Used to track the information of the embedded YouTube videos on a website. |
YSC | session | This cookies is set by Youtube and is used to track the views of embedded videos. |
Cookie | Duration | Description |
---|---|---|
AnalyticsSyncHistory | 1 month | No description |
CONSENT | 16 years 6 months 1 day 12 hours | No description |
li_gc | 2 years | No description |
UserMatchHistory | 1 month | Linkedin - Used to track visitors on multiple websites, in order to present relevant advertisement based on the visitor's preferences. |
yt-remote-connected-devices | never | No description available. |
yt-remote-device-id | never | No description available. |