Emerging market sell off boosts company hedge demand

Companies with business units in emerging nations are stepping up measures to protect against foreign-exchange losses following declines in currencies from the rand to the rupee, according to UBS AG.

"Historically in emerging markets the behavior of the currency has tied in well with the behavior of the economy," Andrew Kaufmann, global head of foreign exchange solutions at UBS in London, said in a phone interview on Wednesday.

"The world’s a bit more nuanced now. Those clients who have the flexibility in their hedging policy to vary the hedging ratios are considering raising them or have done so already." 

Currencies of developing economies slid against the dollar last quarter as the prospect of the Federal Reserve announcing a withdrawal of monetary stimulus reduced the amount of cash available for pursuing higher-yielding assets.

The Indonesian rupiah tumbled 12% while India’s rupee and Turkey’s lira slid to record lows. South Africa’s rand declined 1.5%.

Unilever, the world’s second-largest consumer-goods maker, on September 30 blamed weakening currencies in Indonesia, Brazil, South Africa and India for a sales slowdown, following Adidas AG and Prada SpA in saying that the euro’s strength eroded profit.

"There are many corporates that have a current set-up, particularly with balance-sheet exposures, of not hedging," said UBS’s Kaufmann.

"For some of them, it’s a matter of re-evaluating the situation. It’s not an overnight change. It does take a while to adapt." – Bloomberg

 

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever. But it comes at a cost. Advertisers are cancelling campaigns, and our live events have come to an abrupt halt. Our income has been slashed.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years. We’ve survived thanks to the support of our readers, we will need you to help us get through this.


To help us ensure another 35 future years of fiercely independent journalism, please subscribe.

Advertising

Zuma turns on judiciary as trial nears

Former president says pre-trial correspondence is part of another plot

High court declares Dudu Myeni delinquent

Disgraced former SAA chairperson Dudu Myeni has been declared a delinquent director by the...

SANDF inquiry clears soldiers of the death of Collins Khosa

The board of inquiry also found that it was Khosa and his brother-in-law Thabiso Muvhango who caused the altercation with the defence force members

Lockdown relief scheme payouts to employees tops R14-billion

Now employers and employees can apply to the Unemployment Insurance Fund for relief scheme payments
Advertising

Press Releases

Obituary: Mohammed Tikly

His legacy will live on in the vision he shared for a brighter more socially just future, in which racism and discrimination are things of the past

Openview, now powered by two million homes

The future of free-to-air satellite TV is celebrating having two million viewers by giving away two homes worth R2-million

Road to recovery for the tourism sector: The South African perspective

The best-case scenario is that South Africa's tourism sector’s recovery will only begin in earnest towards the end of this year

What Africa can learn from Cuba in combating the Covid-19 pandemic

Africa should abandon the neoliberal path to be able to deal with Covid-19 and other health system challenges likely to emerge in future

Coexisting with Covid-19: Saving lives and the economy in India

A staggered exit from the lockdown accompanied by stepped-up testing to cover every district is necessary for India right now

Covid-19: Eased lockdown and rule of law Webinar

If you are arrested and fined in lockdown, you do get a criminal record if you pay the admission of guilt fine

Covid-19 and Frontline Workers

Who is caring for the healthcare workers? 'Working together is how we are going to get through this. It’s not just a marathon, it’s a relay'.

PPS webinar Part 2: Small business, big risk

The risks that businesses face and how they can be dealt with are something all business owners should be well acquainted with

The best local and international journalism

handpicked and in your inbox every weekday