How to know if your investments are exposed to currency risk – and what you can do about it

How to know if your investments are exposed to currency risk – and what you can do about it
This article is sponsored by Bank of Queensland.

If you’re an investor or business owner who transacts on financial assets outside Australia, you’re more than likely exposed to some form of currency risk, throwing your projected earnings into a world of unpredictability.

Currency risk rears its head when the value of the currency your investments are denominated in fluctuates in price compared to another, which, given the current volatile nature of the global market, can occur frequently.

To counteract this potential threat, investors and companies often opt for safeguarding measures such as hedge or mutual funds which theoretically reduce the volatility of your financial stakes.

Another increasingly popular route to take is found in foreign exchange hedging using BoQ’s SmartFX, a secure multiple business tool supporting businesses with certainty over risks associated with currency management.

Another increasingly popular route to take is found in foreign exchange hedging – the process of offsetting fluctuations in foreign currency and protecting your investments from negative outcomes, using a foreign exchange platform like BOQ SmartFX. The BOQ SmartFX platform is an international payment tool allowing businesses to manage foreign currency accounts, book foreign exchange rates, make foreign currency payments for current or future value, and buy or sell currencies at specific rates. All this creates more certainty over the risks associated with currency management.

Managing your overseas transactions through the likes of BOQ SmartFX can create the protection of cash flow and profit margins, improved financial budgeting and a better understanding of how currency fluctuations impact your balance sheet.

There are numerous other methods of reducing currency risk. Some currencies are known as safe-haven currencies. Traditionally the Swiss Franc, the U.S Dollar and the Japanese Yen have been expected to retain or even increase in value when there is geopolitical stress or even a global pandemic as risk assets are sold off. In such times these currencies benefit from political stability, sound fiscal and monetary policy and balanced economies.

However, if you do choose to go down the more conventional FX hedging path and certain countries or currencies aren’t necessarily applicable to your situation, BOQ SmartFX can be the tool to control exactly how you plan currency risk and manage day-to-day FX exposures with intuitive reporting and management controls.

If you’d like to understand how BOQ SmartFX can assist, you can find more information here.

Important information

Terms and conditions, fees and eligibility criteria apply.

You should obtain and consider the relevant Product Disclosure Statement (PDS), terms and conditions and Guide to Fees and Charges for the product before making any decision about whether to acquire or continue to hold it.  Full terms and conditions are available online or at any Bank of Queensland branch. BOQ SmartFX® is a registered trademark of Bank of Queensland Limited ABN 32 009 656 740 (BOQ).