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

 

Subscribe to the M&G

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.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Related stories

Orlando Pirates and the curse of the crimson Ghost

What’s black and white and red all over? To the dismay of many, it may just be Pirates’ kit for the new season

Muscular dollar awes the rest

South Africa is less likely to suffer but investors will look for the elusive factor — growth

Reserve Bank decides to hold repo rate at 7% and prime lending rate at 10.5%

As was widely anticipated, the South African Reserve Bank’s monetary policy committee has decided to hold interest rates.

Brexit referendum day finally arrives after months of division

Voting begins today, after months of continuous campaigning from the 'Remain' and the 'Leave' sides, and the results should be in on Friday morning.

Below-zero rates spook the market

With global conditions deteriorating markedly, Janet Yellen has admitted that the Federal Reserve will have to be cautious.

Gold price predicted to drop – after record high

History suggests the metal’s rise is a blip but doubt over US interest rates makes a call difficult.
Advertising

Subscribers only

SAA bailout raises more questions

As the government continues to grapple with the troubles facing the airline, it would do well to keep on eye on the impending Denel implosion

ANC’s rogue deployees revealed

Despite 6 300 ANC cadres working in government, the party’s integrity committee has done little to deal with its accused members

More top stories

Eastern Cape universities concerned by rising Covid cases

Fort Hare says 26 more students have tested positive while Walter Sisulu University says some of its students have been admitted to hospital.

SAA in talks to recoup R350-million in blocked funds...

The cash-strapped national carrier is in the process of recouping its blocked funds from Zimbabwe, which could go towards financing the airline’s business rescue plan

NSFAS’s woes do not help its mandate

Nehawu wants the scheme’s administrator, Randall Carolissen, to be removed

Unions cry foul over SABC dismissal costs and retrenchments

Broadcaster bodies say claims that a recent skills audit is unrelated to retrenchments are ‘irrational’
Advertising

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday