How to manage the risk of foreign exchange speculation?

Economic risk refers to the possibility of changes in the net present value of an enterprise's expected cash flows due to unexpected changes in exchange rates, also known as "cash flow risk".

1. The management methods of foreign exchange speculation risk can be divided into three categories.

① Precautions that can be selected when signing a contract, including selecting the contract currency, adding contract terms, and adjusting the price or interest rate.

1) Choose a good contract currency. In economic transactions such as foreign trade and lending, the choice of which currency to sign the contract as the currency for valuation and settlement or the currency for valuation and settlement is directly related to whether the transaction subject will bear the exchange rate risk. When choosing a contract currency, the following basic principles can be followed: First, strive to use the domestic currency as the contract currency. Second, export and loan capital exports strive to use coins, that is, inforeign exchange marketCurrencies with an upward trend in exchange rates.

2) Add a currency preservation clause to the contract. Currency preservation refers to choosing a currency that is inconsistent with the contract currency and has a stable value, converting the contract amount into the selected currency. At the time of settlement or settlement, the amount expressed in the selected currency will be paid in the contract currency. At present, the currency preservation clauses used by various countries are mainly "basket" currency preservation clauses, that is, choosing multiple currencies to preserve the value of the contract currency, that is, when signing the contract, determine the exchange rate between the selected multiple currencies and the contract currency, and specify the weight of each selected currency. If the exchange rate changes, the amount of the contract currency received and paid will be adjusted accordingly according to the exchange rate change at that time and the weight of each selected currency.

3) Adjust the price or interest rate. In a transaction, it is impossible for both parties to obtain a contract currency that is already favorable. When one party has to accept a currency that is unfavorable to itself as the contract currency, it can strive to make appropriate adjustments to the price or interest rate under negotiation: such as asking for an appropriate increase in the export price denominated in soft currency, or the loan interest rate denominated in soft currency; asking for an appropriate decrease in the import price denominated in coins, or the loan interest rate denominated in coins.

② Financial marekt operation. After the transaction contract is signed, foreign-related economic entities can use the foreign exchange market and the currency market to eliminate foreign exchange risks. The main methods are spot exchange, futures exchange, futures exchange, options exchange, borrowing and investment, borrowing - spot exchange - investment, discounting of foreign currency bills, interest rates and currency swaps, etc.

1) Spot foreign exchange trading. This mainly refers to the use of spot trading by foreign exchange banks to balance their daily foreign exchange positions in the foreign exchange market.

2) Borrowing and investment. It refers to the purpose of eliminating foreign exchange risk by creating debts or claims in the same currency, the same amount, and the same maturity as future foreign exchange earnings or expenditures.

3) Discount of foreign currency bills. This method not only helps to accelerate the exporter's capital turnover, but also achieves the purpose of eliminating foreign exchange risks. Exporters who provide financing to importers and have forward foreign exchange bills can take forward foreign exchange bills to the bank for discount, obtain foreign exchange in advance, and sell them to obtain local currency cash.

③ Other management methods. In addition to the above methods of signing contracts and relying on financial operations, there are also some methods, mainly: advance or wrong, matching, and insurance.

1) Advance or wrong payment of foreign exchange. It refers to the foreign-related economic entity's prediction of the exchange rate of the denominated currency, and the settlement date or settlement date of the receipt and payment of foreign exchange is advanced or wrong to achieve the purpose of preventing foreign exchange risks or obtaining exchange rate fluctuations.

2) Pairing. It refers to a foreign-related entity that, when or after a transaction occurs, conducts another transaction that is exactly the same as the transaction in terms of currency, amount, and payment date, but the flow of funds is opposite, so that the two exchanges face the impact of exchange rate changes to offset each other.

3) Insurance. Refers to foreign-related entities insuring relevant insurance companies against exchange rate changes. Once they suffer losses due to exchange rate changes, the insurance company will give reasonable compensation. Insurance for exchange rate risk is generally borne by the state.