In my day job I have a currency hedging requirement and I’ve been thinking about how best to resolve it.
I’m in Australia and need to provide a quote for a service in Australian dollars. A supplier of the service is located in the US and I pay them US dollars.
Doing the hedge is rather straight forward, buy the amount of US dollars required, then sell when the hedge is no longer required.
The more complex part is how to hedge the changes between providing the quote and being paid, with the recent volatility this could be fairly significant.
What I’ve decided is most suitable is to make trendline projections off the lows and use those for quote rates so if the payment is forthcoming quickly the rate is better, if the payment is slow, it’ll cost more as the AUD declines.
Is there a better way to do this?