Through HSBC Egypt, corporates with exposure to RMB now have access to natural hedging of payables, receivables, assets, and liabilities as well as FX Forward
and Options hedging solutions.
On December 18, 2017, the ESA published a draft regulation ("Draft RTS") amending Delegated Regulation (EU) 2016/2251 with the intention of leveling the playing field between EU and non-EU entities when it comes to physically settled FX forwards
. (61) Specifically, the ESA suggested limiting the requirement so that the only variation margin that is required to be exchanged are those for physically settled FX forward
transactions entered into: (1) with "institutions" within the meaning of the Capital Requirements Regulation (i.e., credit institutions and investment firms), or (2) with an equivalent entity located in a third country that, if it were located in the EU, would meet the definition of institution.
'Importantly, banks are expected to conduct the necessary client suitability assessment procedures, discuss the product information, and disclose the risks and costs associated with the non-deliverable FX forward
transaction and the CRPP Facility with their clients,' the BSP said.
The REIT manager has entered into an FX forward
contract for its dividend payments but only for one year.
Caps on FX forward
positions will be raised as of July 1, 2016, from 30 percent to 40 percent for local banks and from 150 percent to 200 percent for foreign bank branches in Korea, while the bank levy rate will be held at the current level of 0.1 percent and will be imposed on short-term liabilities: on the amount which will reach maturity in a year or less.
The conventional derivatives used in hedging such as FX forward
contract is prohibiteddue toribaalnasi'ahas it involves contract for future sale where both price and delivery are deferred.
Allowing 5bp for bid ask spread and a carry of +15bp per month (based on 6m FX forward
implied yield of 6.47%, which we think will be more appropriate for international investors or for more defensive investors who would like to hedge FX risk), we set risk the stop at 7.70%, which offers a risk reward of 3:1.
Consider this very common FX example where, typically, central treasury enters into a hedge, and let's say, it's an FX forward
hedge with a swap dealer on behalf of numerous exposures it has collected from affiliates.
Foreign exchange turnover by banks in Korea fell in the third quarter as exporters' sale of FX forward
deals declined amid the global economic slowdown, the central bank said Monday.The daily foreign exchange turnover averaged $45.42 billion in the July-September period, down 3.9 percent from three months earlier, according to the Bank of Korea (BOK).
In an FX forward
contract, effectiveness is assessed by comparing the changes in the spot rate of the currency underlying the forward contract with the changes in the spot rate of the currency in which the forecasted transaction is to be consummated.
The July reform was followed by successive reform measures in August (17) to enlarge the scope of forward FX purchase and sales and swaps between the RMB and foreign currencies, (18) to invite non-financial enterprises and non-bank financial institutions to participate in the inter-bank market, to add RFQ (Request for Quote) trading mode into the current auction market and to introduce inter-bank FX forward
and swap trading as well as a market making system.
Non-euro-denominated assets that are unhedged are limited to an exposure of 2.5% and, combined with principal hedged obligations (hedged with FX forward
agreements) are limited to a 5% exposure.