ENP Newswire -
Release date- 03072014 - In recent years, ICBC has steadily developed foreign exchange hedging products in response to the demand of export-oriented enterprises for hedging against exchange rate and interest rate risks.
According to statistics, ICBC conducted foreign exchange hedging transactions worth as much as
Frequent fluctuation of exchange rate and interest rate on the international financial market has posed a big challenge to the financial management of export-oriented enterprises which, therefore, cried for hedging products to properly manage their foreign exchange risk. As a response, ICBC has rolled out foreign exchange hedging products and helped enterprises avoid risks of exchange rate and interest rate by adopting financial instruments such as forward exchange rate and forward interest rate, swap, option and hybrid instruments. In addition, ICBC designed tailored products and innovative functions to meet customers' diversified hedging demand. Seeing customers' demand for hedging in overseas financing, syndicated loans and international settlement, ICBC offered combination products and integrated financial solutions, which protected enterprises' production and operation via both traditional financial services and risk hedging.
For example, amid expectations for stronger yuan versus the U.S. dollar, a foreign trade enterprise hoped to avoid the impact of exchange rate changes to the payment in USD receivable in three months. ICBC offered forward exchange settlement service to the enterprise, fixing the forward exchange rate of USD against RMB in three months at 6.2400. Three months later, the exchange rate of USD against RMB turned out to be 6.1419, while the enterprise avoided the impact of unfavorable change of exchange rate on its revenue by locking in the rate of 6.2400 as agreed in the forward exchange settlement contract. In another example, an enterprise had a long-term loan with a floating USD interest rate. However, increasing USD interest rate arising from the Fed's exit from QE would drive up its financing cost. By leveraging ICBC's USD interest rate swap to convert the floating interest rate into the fixed interest rate, the enterprise locked in the interest rate amid subsequent rise of USD interest rate, thus avoiding the impact of rising interest rate and effectively controlling the financing cost.
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