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Mitigating FX Risk Amid Market Sea Changes

Some markets in the global economy have been anything but steady lately, and that’s posing some worrying obstacles for corporate money managers. In an interview with Finance Magnates published late last week, Citizens Bank Head of Global Markets Tony Bedikian explained that foreign exchange concerns are pushing businesses closer to their banks as they seek guidance on how to mitigate risk.

China’s ongoing economic struggles have been particularly concerning for businesses doing cross-border deals, the executive said. “At the moment, the market is driven by China,” he told the publication. “The China story is interesting. Everything – currencies, equities, Chinese growth and commodities – has been extremely correlated.”

But the Chinese market isn’t the only issue on corporate treasurers’ minds.

Bedikian said that businesses are keeping a close eye on European equity market adjustments and the impending interest rate hike by the U.S. Federal Reserve. Emerging market currency values are on the decline, he said, amid lower yields on U.S. securities.

In response, businesses are turning to their banks to seek the guidance and support they need to navigate these risks.

“We have clients that have exposure to EM [emerging markets] currencies, and many of these currencies have pulled back to all-time lows, or near 2008-crisis lows,” he told the publication. “So we have a lot of clients expressing an interest to hedge their exposure to some of these foreign currencies where they have payroll expenses to pay.”

Bedikian told Finance Magnates that Citizens Bank has focused on providing perspective to its corporate customers, especially when the tides of global markets can quickly shift. “If China does hit a turning point and things do improve, then it’s also likely commodities will improve and EM markets will also improve – the markets can turn on a dime,” he stated.

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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