OOCL reduces emerging market currency risk
OOCL is minimizing the accumulation of currencies in emerging markets to reduce its foreign-exchange risks, because hedging costs are higher in these more-restricted markets, an executive said Thursday.
The Hong Kong-based carrier, which uses the U.S. dollar as its base currency, hedges its exposure to around 60 currencies worldwide to protect revenue, said OOIL Group Treasurer Carrie Lee, according to Dow Jones.
OOCL may delay conversion of surpluses of emerging-market currencies back to the dollar if the currencies are strong, Lee told a forum in Shanghai.
The carrier occasionally uses non-deliverable forwards to hedge emerging-market currencies, though it views these instruments as an expensive option, Lee said.
She said the company trades foreign-exchange options globally, typically selling a call option with a strike price close to OOCL's target rate. The company receives a premium for that sale, which it uses as a subsidy toward the final receivable.
The liner shipping subsidiary of OOIL typically trades options for periods matching actual receivables, usually one to two months, she said. If the underlying currency rises during the period, the company may use forward hedges to cover its position and protect it against downside risks.
The Hong Kong-based carrier, which uses the U.S. dollar as its base currency, hedges its exposure to around 60 currencies worldwide to protect revenue, said OOIL Group Treasurer Carrie Lee, according to Dow Jones.
OOCL may delay conversion of surpluses of emerging-market currencies back to the dollar if the currencies are strong, Lee told a forum in Shanghai.
The carrier occasionally uses non-deliverable forwards to hedge emerging-market currencies, though it views these instruments as an expensive option, Lee said.
She said the company trades foreign-exchange options globally, typically selling a call option with a strike price close to OOCL's target rate. The company receives a premium for that sale, which it uses as a subsidy toward the final receivable.
The liner shipping subsidiary of OOIL typically trades options for periods matching actual receivables, usually one to two months, she said. If the underlying currency rises during the period, the company may use forward hedges to cover its position and protect it against downside risks.