BusinessWorld: Hedge options for OFWs readied
THE BANGKO Sentral ng Pilipinas (BSP) will hold forums to educate exporters and families of overseas Filipino workers (OFWs) on how to ease the effects of the peso’s rapid appreciation on their finances.
Monetary authorities will hold one session each in Luzon, Visayas, and Mindanao within the first quarter, with presentations from banks offering hedging facilities and testimonies exporters who have benefited from such programs.
Exporters and OFWs have been complaining of the rapid rise of the peso — which appreciated by about 18% last year — and are demanding special treatment such as subsidized currency exchange rates.
Exporters are instead being encouraged to hedge but banks are still encountering some resistance as the practice of hedging is still unfamiliar.
Hedging is a financial tool designed to minimize one’s exposure to unwanted business risks while still allowing profit from an investment activity. Some of the most common currency hedging tools offered by banks are forward contracts, options, and swaps.
State-run Development Bank of the Philippines’ hedging program for exporters, for instance, allows for the settlement of the difference between the agreed dollar or peso forward rate and the market rate at maturity.
"We will do [the presentations] in a simple way so the [small- and medium-sized businesses] and exporters in the provinces will be able to understand the message of the opportunity to hedge their export receipts," BSP Deputy Governor Diwa C. Guinigundo said last week.
The central bank will also present other options for dollar-earners to shield themselves from foreign exchange fluctuations, Mr. Guinigundo said.
"Aside from going into derivatives or hedging facilities, what other countries [have done] was find new markets, cut costs, and offer new products," he said.
Most banks have licenses for derivatives transactions, allowing them to offer hedging tools. Banks are given licenses based on their capacity to offer such products, he added. — G.S. de la Peña/BusinessWorld
Monetary authorities will hold one session each in Luzon, Visayas, and Mindanao within the first quarter, with presentations from banks offering hedging facilities and testimonies exporters who have benefited from such programs.
Exporters and OFWs have been complaining of the rapid rise of the peso — which appreciated by about 18% last year — and are demanding special treatment such as subsidized currency exchange rates.
Exporters are instead being encouraged to hedge but banks are still encountering some resistance as the practice of hedging is still unfamiliar.
Hedging is a financial tool designed to minimize one’s exposure to unwanted business risks while still allowing profit from an investment activity. Some of the most common currency hedging tools offered by banks are forward contracts, options, and swaps.
State-run Development Bank of the Philippines’ hedging program for exporters, for instance, allows for the settlement of the difference between the agreed dollar or peso forward rate and the market rate at maturity.
"We will do [the presentations] in a simple way so the [small- and medium-sized businesses] and exporters in the provinces will be able to understand the message of the opportunity to hedge their export receipts," BSP Deputy Governor Diwa C. Guinigundo said last week.
The central bank will also present other options for dollar-earners to shield themselves from foreign exchange fluctuations, Mr. Guinigundo said.
"Aside from going into derivatives or hedging facilities, what other countries [have done] was find new markets, cut costs, and offer new products," he said.
Most banks have licenses for derivatives transactions, allowing them to offer hedging tools. Banks are given licenses based on their capacity to offer such products, he added. — G.S. de la Peña/BusinessWorld
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