Rising interest rates in 2022 have Corporate Treasurers looking at new ways to manage risk and hedge foreign exchange exposure differently than they did in the past. Many in these markets have never experienced an inflation cycle like we have witnessed in the past year, and they are now looking for new tools to navigate these uncharted waters.
The role of the Corporate Treasurer has evolved significantly in recent years as they take on more responsibilities across the organization. They now need to re-assess current hedging strategies in an effort to minimize currency exposures as intra-day volatility has increased and long-term FX rates trend out of typical ranges.
Once immune to Central Bank and world trade headlines on the news, today News and Economic events are inflating currency movements. Treasurers now monitor such things as CPI to track inflation globally, as it can be extremely costly not being aware of how FX is so sensitive to this new environment.
There has been a healthy shift in workflow as Treasurers are now leveraging on opportunities to optimize their processes by deploying automation technology, such as electronic trading platforms for execution. Trading platforms can address the key drawback of legacy workflows offering competitive pricing and straight through processing. But now there is more to the role then just execution.
Treasurers now need to have more FX forecasting tools and a better understanding of global markets, trade, and geopolitical events that may affect the value of a currency they do business in. Understanding these impacts and potential changes to currency valuation can save significant dollars by using this data to adjust hedging and risk strategies.
Only a dedicated solution that seamlessly combines market surveillance, real-time news, price discovery, and FX forecasting tools can arm Treasury teams with the tools they need to make educated decisions. Add that to execution and post-trade settlement activities into a single click, and this complete package can provide the holistic automated system treasuries need nowadays. And with the publishing of the FX Global Code in 2018, that presents best practices to treasury departments such as being able to prove best execution, pre-trade transparency and post-trade confirmation.
Times have changed
The old idea of low interest rates, low inflation and low FX volatility markets are a thing of the past as we have entered a new cycle of just the opposite. Being prepared with tools, insights, data and analytics can springboard FX Treasurers to quickly adapt and pivot their strategies to stay ahead of risk hiding beyond the horizon. Through Bloomberg’s team covering everything from FX electronic trading, News, Economics, and Technical trends, Treasurers can feel confident that they have the tools to make informed decisions while keeping up with changes in trends.