You
What is our current foreign exchange exposure in EUR and GBP?
Assistant
Latest EUR and GBP exposure from open invoices and bills:
| Currency | Receivable | Payable | Net |
|---|---|---|---|
| EUR | EUR 412,000 | EUR 286,500 | EUR 125,500 |
| GBP | GBP 96,200 | GBP 118,400 | GBP -22,200 |
A 5% EUR drop would cost about $6,800. I would not hedge at this size.
You
Convert the net positions to USD.
Assistant
At EUR/USD 1.0842, the net EUR position is about $136,100. The net GBP position is about -$28,200 at GBP/USD 1.2716.
You
What would hedging the EUR side cost?
Assistant
A forward contract on the EUR side would cost roughly 0.4% of notional, about $540, to protect against a $6,800 loss in a 5% move. That is a reasonable price, but the exposure is small enough that I would still leave it unhedged.
You
At what point should we start hedging?
Assistant
Triggers I would use to revisit the decision:
- Net EUR position above EUR 300,000
- EUR/USD moves more than 4% in a month
- A single EUR contract above EUR 150,000 is signed