Currency hedge

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Currency hedge


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Old 16th November 2008, 06:37 AM
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Ok, so the obvious route to hedge currency (and lock in the strong USD/AED weak GBP) is to take out a loan in AED and convert to GBP.

Only snag I hear is that unsecured lending rates are high, and loans increasingly hard to come by.

Anyone had experience of how to get around this? Good ideas?

Anyone used money market tools to get around this?

Advice appreciated,
cheers....

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Old 16th November 2008, 08:03 AM
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Putting on my professional hat, currency speculation is high risk. Wholesale rates AED:GBP were between 5.3 and 5.5 on Friday, but there is still a possibility that it could fall further. USD:GBP is around 1.46, but some pundits think it could fall as low as 1.3.

You should only do this with money you can afford to lose (at least part of). Borowing to speculate on currency markets is a mugs game. Not only are you taking on a debt that you must service, but you are simply hoping for markets to move the other way, which they may not do for a long time.

Banks are tightening lending criteria in the UAE, as well as increasing rates, so if you are struggling to get a loan, that is even more reason not to borrow to speculate. You would also have to invest a considerable sum to make the potential returns worthwhile, thus also increasing your risk.

I do have access to currency tools, but do not recommend that you do this.

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Old 16th November 2008, 08:32 AM
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Hi Elphaba,
Thanks for this.

I have a GBP denominated debt to pay back and have a fixed term contract in Dubai, so I am looking at hedging an existing exposure rather than creating a new one.

I will try and catch up with you at one of the forum meet ups to discuss...or arrange to discuss

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Old 16th November 2008, 08:42 AM
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Quote:
Originally Posted by greatexpectations View Post
Hi Elphaba,
Thanks for this.

I have a GBP denominated debt to pay back and have a fixed term contract in Dubai, so I am looking at hedging an existing exposure rather than creating a new one.

I will try and catch up with you at one of the forum meet ups to discuss...or arrange to discuss

That sounds a little better. I was getting rather worried.

I don't get to forum meet ups, but PM me if you'd like my work email address.


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