Waning interest to hedge amongst exporters

Monday, 16 June 2014, 4:01 pm
Press Release: ASB Bank

Media release
ASB Kiwi Dollar Barometer

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Waning interest to hedge amongst exporters

• Interest to hedge amongst exporters continues to decline
• Just a small proportion of businesses use treasury policies to guide their hedging decisions
• Small businesses more likely to base hedging decisions on the timing of cash-flows

The latest ASB Kiwi Dollar Barometer finds declining interest to hedge amongst exporters.

ASB Chief Economist Nick Tuffley says the proportion of exporters intending to hedge has dropped markedly over the last year.

“It’s likely the depreciation in the NZD in the lead-up to the survey discouraged exporters from hedging,” Mr Tuffley says.

When it comes to importing businesses however, the Barometer reveals a different story, with the proportion of importers intending to hedge continuing to edge up in the latest quarter.

While fewer exporters intend to hedge relative to importers, those exporters that do hedge do so across a greater proportion of their foreign exchange (FX) exposure.

The Barometer also reveals low use of treasury policies amongst businesses, with no small businesses surveyed having a treasury policy to guide FX hedging decisions. The majority of small businesses based their hedging decisions on the timing of cash-flows.

“These results suggest there is scope for small businesses to make greater use of external advice and to put in place guidelines for their hedging decision-making process in order to better manage their FX risks,” Mr Tuffley says.

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ENDS

Note to editors

The ASB Kiwi Dollar Barometer tracks exporters’ and importers’ exposures to foreign exchange risk, through surveying businesses with annual turnover of at least NZ$1 million.

The Barometer also surveys businesses’ expectations for the NZD/USD and hedging plans for managing foreign exchange risk.

Hedging involves reducing the risk of adverse currency movements to a business by using instruments such as FX forwards. These instruments can protect exporters from an appreciation in the NZD, and importers from a depreciation in the NZD.

For the June 2014 edition of the ASB Kiwi Dollar Barometer, East & Partners interviewed 399 businesses turning over at least NZ$1 million per year. The interviews were conducted between April 28 and May 9 2014. Businesses were asked a range of questions about their exposure to and views about the NZD.

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