What Is Currency Hedging And How Your Knowledge Of This Market Can Be A Positive

Currency Exchange

Are you planning a trip abroad but worried about how far your spending money will stretch? Maybe you fancy a serious attempt to make money from the currency markets? Let me guide you through how you can use the techniques and knowledge of currency hedging to your advantage.

Currency Hedging

Firstly, what does that term currency hedging mean? Basically it is an approach that is designed to reduce the impact of exchange rates on your money when engaged in transactions across different currencies.

This takes place through financial instruments. So, purchasing a forward contract allows you to ‘lock in’ an exchange rate to avoid any big changes by the time you conclude the deal. Buying what’s called an ‘option’ means that, as the name suggests, you can choose an agreed rate but ditch this if conditions move in your favour.

Understanding the market and spotting trends within it is important. Hedging is, effectively, your way of acting on the risk and trends that you’ve spotted.

To find out about the latest market prices visit IG. Analyse these and you’ll get a flavour for where your money can go much further.

This isn’t just some dry investment technique. You can apply this to your holiday shopping to get the very best deal from your next getaway too.

Best conversion rates

The Australian Dollar may have fallen against some of the more traditional holiday destinations such as the US Dollar, UK Pound and the Chinese Yuan. These destinations are out of the running for now for Australian travellers – just as much as they are troublesome for investors - as they have become more expensive.

Yet if you want to use your currency market knowledge to bag a bargain there are still destinations out there.
Here are a suggestion of some of the best value places to visit based on a conversion from the AUS dollar.

Canada – The Canadians have suffered in the markets in the past year or so. In real terms that means that the Australian dollar was worth 95 Canadian cents. Now, it’s worth around $1.05. An extra tip to save money is to stop over in Singapore rather than Hawaii or anywhere else in the US, as again the exchange rates and flights are lower. Canada is a vast and diverse country to explore. Making plans and researching prices before you travel there is the key to making the most of every cent.

Brazil – Rio de Janeiro in Brazil is a beautiful destination - whether or not you want to see the Olympic Games and you can currently get around 2.6 Brazilian Reals to your dollar. This spectacular location is surrounded by stunning mountainous scenery and golden beaches. Despite the value for money it is important to bear in mind the potential risk of the Zika virus before selecting this holiday destination. The Australian Department of Foreign Affairs and Trade currently advises that pregnant women should exercise particular vigilance as infection with the virus may cause cognitive impairment in new born babies.

Kazakhstan, Azerbaijan and Russia – These countries recently moved to free float currencies which meant that as a result their currencies plunged, devaluing by as much as 50% overnight. This means for Australian travellers you get much more spending money for your dollar. There are lots of gorgeous places to visit including Gobustan and Mud Volcanoes and a variety of museums from modern art to miniature books.

So who said your knowledge of number wouldn’t come in handy? Use the information and techniques deployed by traders to have a positive impact on your holiday spending power.


Posted By mick on 10th June 2016

Updated : 10th June 2016 | Words : 598 | Views : 6682

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