In light of Donald Trump’s presidential victory and the resulting fluctuations in the US dollar, Privalgo underscores the importance of effective currency risk management for businesses with dollar exposure. Recent market volatility has heightened uncertainty, making it essential for companies to approach this period with careful strategy and preparation.
Matthew Clarke, Co-Founder and Chief Revenue Officer at Privalgo, noted, “The market’s hesitation in declaring a winner reflected the tight race, which in turn drove post-election shifts in the dollar’s value.”
The US dollar index (DXY) – a measurement of the dollar’s position against a basket of six currencies – surged by 1.6% on Wednesday as investors bet on Trump’s likely inflation-inducing policies slowing interest rate cuts. However, the DXY plunged on Thursday by 0.8%, highlighting the current uncertain climate.
Privalgo underscores the importance of monitoring global market conditions for further fluctuations. The company predicts a continued period of significant volatility, emphasising the need for vigilance and diligent currency management.
“We advise businesses to adjust their currency risk management strategies to mitigate potential losses amidst market uncertainties that arise,” continues Matthew Clarke from Privalgo. These strategies might include the following:”
– Hedging: Utilise forward contracts and currency options to safeguard future transactions against currency fluctuations.
– Multicurrency Accounts: Maintain accounts in multiple currencies for efficient fund management during favourable exchange rate fluctuations.
– Regular Market Analysis: Stay informed about market trends to make well-informed decisions in managing currency risks.
– Flexible Payment Terms: Negotiate adaptable payment terms to counter significant currency movements.
– Diversification: Spread operations and investments across stable currency regions to reduce risk exposure.
– Currency Clauses: Include provisions in contracts to adjust prices based on currency rate changes.
– Expert Advice: Seek guidance from financial experts specialising in currency risk management to tailor strategies for specific business requirements.