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1 AIM FX Presentation October 3, 2006 Marsha Sompayrac SunTrust Bank.

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Presentation on theme: "1 AIM FX Presentation October 3, 2006 Marsha Sompayrac SunTrust Bank."— Presentation transcript:

1 1 AIM FX Presentation October 3, 2006 Marsha Sompayrac SunTrust Bank

2 2 International Trade Transactions always involve currency exchange. US Exporters may receive the exact amount of funds in US Dollars, and therefore, feel comfortable. But the buyer had to make a conversion from their currency. But was there a missed opportunity that may have benefited the buyer or the seller? Exporters Company Partnerships - Pricing

3 3 Opportunities may exist for the buyer and/or the seller to benefit based on how the foreign exchange is processed. They can eliminate the risk inherent in their international cash flows They can mitigate exposure created by exchange rate fluctuations They can take advantage of opportunities created by exchange rate fluctuations Exporters Company Partnerships - Pricing

4 4 Exporters Company  Competitive advantage – Are your competitors pricing in the local currency?  This is more attractive to your existing customers and future customers because the exchange rate risk is transferred back to you.  The exchange rate risk can be managed and used to your advantage. Statistics show that companies can create and additional 3-5% in margin by actively managing their FX exposure. Partnerships - Pricing

5 5 Exporters Company : Spot Contracts - One or Two day value to process foreign denominated payable/receivable (Largest Volume. Forward Contracts - Longer Values, typically up to 1 year, used to lock-in exchange rate and hedge fluctuations of foreign payable/receivable. Can require credit consideration. Option Contracts - Used to establish a position in a currency with upside participation and downside protection, usually requires an initial premium, some positions can be assumed without paying a premium. Minimum amount $500,000. Requires credit consideration. Foreign Exchange Basics

6 6 Use average rate from prior year to establish budgeted rate for next year. Can be adjusted on an annual basis or more frequently. Use monthly/quarterly closing rate from prior month/quarter to establish rate. This is more typical in a commodity relationship. Partnerships. If pricing is sensitive companies can split the variations in foreign currency movements. Typically a 50% split. Hedge with forward contracts or participating forwards below your budgeted rate to lock in additional profit. Ways to Price in FX

7 7 In the past, companies agree on a current exchange rate basis, and set the price in US Dollars. At time of payment the foreign client obtained the exchange rate, and advised the US supplier of the differences to be settled. Partnerships FX

8 8 Partnerships FX - New Today’s technology allows companies to access foreign exchange rates that are competitive over the internet. This also gives buyer and seller the ability to include FX rate discussions as they communicate about pricing and other issues.

9 9 Currencies Traded by SunTrust Foreign Exchange Spot, Forward, & Option** Australian Dollar Canadian Dollar Danish Kroner EurosSpot Only Great British PoundIndian Rupee Hong Kong Dollar Japanese Yen Mexican Peso New Zealand Dollar

10 10 Norwegian Kroner Swedish Kroner Swiss Franc Singapore Dollar ** Certain currencies require a minimum US dollar amount for Option Contracts For currencies not listed above, SunTrust can obtain exchange rate quotes subject to availability. Please contact your SunTrust Foreign Exchange Representative for more details.

11 11 “ Our goal is to be our clients’ trusted advisor on all issues pertaining to foreign currency & financial risk. We deliver on this goal by understanding our clients’ business process, exposures, offering effective solutions and executing appropriate strategies.” Mission Statement

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