When considering an FX hedging strategy, a key question is “what is my exposure”?
For example, if I am the treasurer for a UK based company with payables in Euros, how much Euro do I expect to need each month to pay my suppliers? How much to hedge is very much dependent on understanding the size of the exposure.
Some companies will have very stable and predictable foreign currency requirements but for others this may be unpredictable, lumpy and hard to forecast.
A 12 month auto-generated exposure forecast
Just because making a foreign currency exposure forecast is challenging, that isn’t an inadequate reason to not make one. A baseline for a forecast can be the historical foreign exchange contracts that you have settled in the past. Our latest feature in Hedgebook’s Exposure Tool is an automatically generated 12-month forecast based on historical trades.
To create this Hedgebook analyses previously settled hedging contracts to form the basis of a forecast. Using our GBP/EUR importer example below, Hedgebook looks for any matured sell GBP / Buy EUR trades within the portfolio and aggregates them into monthly amounts. It then looks for spot, forward and swap deals. Expiring options will already have been converted into a spot or forward.
In this example we can see there is no exposure in April 2026. The reason for that,is there was no maturing hedging in April 2025 as highlighted in the following Historic Hedging chart that shows historical performance versus budget rate:
If Hedgebook detects an existing user defined exposure the auto-generated exposrue forecast will be disabled by default within the Exposure Tool. However, if a user defined exposure is not present the auto-generated forecast will be automatically enabled.
The forecast can be adjusted higher or lower to support hedging scenario analyses.
Hedging strategies rely on foreign currency exposure forecasts so now we have made it easy to get started.
To see how to add a user defined exposure check out this video.
Or – if you would like to learn more about what Hedgebook Exposure Tool does and how it can help you better manage your foreign exchange risk generally then check out our FX Exposure Tool page.
Even better – reach out for a quick online demo and we can show you exactly how it will work for you.