You may have already been involved in the foreign exchange market (FX), but did you know it could help your business too? Having the right insights into business FX can work wonders, help protect your investments, and boost your business potential.
If you’ve never thought about using FX this way, it can be tricky to know where to start. Running a business pushes your time limits to their maximum, without needing to learn the technicalities of FX. We can help you there.
Read on for 3 ways to use FX in business.
1. Increase Your Flow of Available Cash
You can boost your cashflow with FX services. If you trade with foreign companies, you can use FX services to smooth out the transaction process and use tools like dynamic currency conversion to protect your revenue.
You can track your income more easily with FX tools, minimising the risk of surprise expenses. You can also avoid too much exposure to currency fluctuations.
Looking build start-up capital? The right FX investments can build your resources, and the right tools help you take full advantage of FX market movements. This frees up your time to focus on your business.
2. Protect Your Investments with FX Hedging
FX hedging lets you reduce your financial business risk by spreading your investments across multiple currencies. This protects you from currency fluctuations because when if one currency pair falls, your others offset your losses.
Direct hedging is when you have a currency pair in your portfolio, say USD/GBP, and you also invest the other way, GBP/USD. If the dollar falls, you offset your losses with your investment in pounds.
Correlation hedging relies on inverse correlation between currencies, like the United States dollar and the Japanese yen – a fall in one is offset by the other. The opposite effect can be found in positive correlation between two currencies, which means if one falls the other will follow.
You can invest in currency pairs to take full advantage of this. Major pairs are the most popular, and they match a major currency against the dollar – USD/JPY, USD/GBP, USD/CHF. Cross pairs exclude the USD, but match your currency to another major one, like JPY/GBP.
3. Stay Competitive in the Global Market
When you compete on a global scale, you need all the help you can get. FX tools can help you stay ahead of your competition, reducing your costs and letting you offer more attractive prices. You can reduce your odds of running into overseas business challenges.
Payments to and from overseas businesses will be faster and easier. You can lock in the best exchange rates to boost your profits. Your whole transaction process will be more streamlined than your competitors, making other businesses want to trade with you more often.
By tracking the FX markets, you can spot potential business opportunities based on the position of that currency. You could also invest in emerging markets, although this comes with added exposure to risk and greater volatility.
Ready to Get Started with FX for Business?
We hope this guide helps you to optimise your business using FX. If you’re looking for a way to get ahead in the game, FX tools can give you an edge. Make the most of your overseas business deals and increase your business profits.
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