Just a heads up, our Online and Mobile Banking Apps will be unavailable between 12:00am and 08:00am on Sunday, 15th Dec while we make some improvements. We apologise for any inconvenience.
Fluctuations in currencies and interest rates can make big differences to your end of year results. Our specialist team can work directly with you to help protect your business and give you the confidence to plan ahead.
Find out how our risk management team can help you TALK TO US
Foreign exchange risk management
Manage your international exposure
Ups and downs in the currency market can affect your import payments and export receipts. Here are some products you can use to minimise your risk.
Spot foreign exchange
This is simply an agreement to buy or sell one currency in exchange for another. You settle the contract immediately, at a price based on the current exchange rate ('spot').
Forward Foreign Exchange Contracts
Known as FECs, these let you set an exchange rate that you can use for foreign currency requirements on a specific future date. So whatever happens to the exchange rate you’ll know your income or cost in New Zealand dollars.
Pros
With a known exchange rate you can budget and plan ahead
The expiry of the FEC can match the cash flow of the transaction
Cons
You can’t take advantage of better rates
These are fixed price obligations, so if a transaction doesn’t happen or production fails, you could lose when settling your FECs
Foreign currency options
These protect you if the exchange rate moves in the wrong direction over a specified time, but also let you get the benefits if the exchange rate moves in your favour.
Pros
You can take advantage of better rates
You have a known worst-case rate that applies to the transaction
You only pay the premium expense whether you exercise the option or not, which is useful if you’re uncertain whether the transaction will happen or if production could fail
The expiry of the option can match the cash flow of the transaction
