Treasury Management Internation Logo
Risk Management
Published  13 MIN READ
Please note: this article is over 8 years old. If you feel this article is inaccurate or contains errors get in touch here. Many thanks, TMI

From Commodity to Strategy: A New Era for FX

by Helen Sanders, Editor

Foreign exchange undertaken by corporations has often been dismissed as a commoditised product in recent years, with wafer-thin margins and a predominance of electronic trading, particularly for commonly-traded currency pairs. This is changing, for a variety of reasons, not least the expansion of multinational corporations in Asian, Latin American and African markets, and the emergence of corporations headquartered in these regions that do not use ‘traditional’ currencies such as USD or EUR as their base currencies. In addition, as treasurers continue to enhance financial and operational efficiency, reducing FX risk and cost is an important element of their optimisation strategy.

Shifting corporate FX requirements

Despite the apparently ‘workhorse’ nature of most corporate FX activity, i.e., to fund foreign exchange liabilities and exchange surplus FX receipts into base or another required currency, FX has emerged as an important priority for treasurers. Morgan McKenney, Global Head of WorldLink® Payment Services, Treasury & Trade Solutions, Citi Transaction Services explains,

“Globalisation, urbanisation and digitisation are macro trends driving dramatic changes in how market participants operate to transform challenge into opportunity. According to a recent study undertaken by Citi, FX exposure management and local currency payments regulations are amongst corporate treasurers’ key priorities, highlighting the importance of an effective approach to foreign exchange and cross-currency payment management.”