December 14, 2010
Homing in on FX Reporting
Amid volatility and currency appreciation managers dig deep
When the two NeuGroup Foreign Exchange Managers’ Peer Groups met for their summer meetings in September, they discussed how the economic environment was forcing members to reexamine how they analyzed and reported FX risk. Other topics included:
1) Financial Reform and Hedge Accounting Overhaul. Members were given an overview of the Dodd-Frank Act and proposed accounting rules.
Key Takeaway: The vanilla FX market may be left alone, and there are signs that accounting rules may not be a great deal more cumbersome.
2) Managing China Exposures. The Chinese government is loosening FX rules and pushing to make the RMB a global settlement currency.
Key Takeaway: Service availability and rules differ from province to province in China. However, China is moving toward “internationalization” and cross-border FX trades are already easier.
3) Management and External Reporting of FX Results. Several members walked the group through their various approaches.
Key Takeaway: As companies determine how best to report FX results, they may be “over-reporting” in an effort to show accountability and understanding of cause and effect.
4) Hedge programs. Members reviewed different hedge programs and approaches.
Key Takeaway: Growth rates and C-suite attitudes are factors in the openness to dynamic and opportunistic hedging.
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