The importance of emerging markets in the world economy has grown steadily but managing EM currency risk can be a nightmare for the unwary corporate treasurer. By 2014, emerging market economies already accounted for 36% of world GDP and 27% of world trade, yet in the period between 2010 and 2015 there were eight large depreciations of emerging market currencies, according to the International Monetary Fund. Managing the company’s financial interests in these challenging markets has become a top priority for treasurers. Which factors should treasurers look at?
1. Create a dynamic hedging strategy
2. Manage the complexity of each local jurisdiction
3. Turn to options to mitigate risk
Case study: The Chinese renminbi at the top of the corporate hedging agenda