In recent years the Canadian dollar has had an unpredictable value. The profitability of importers and exporters has taken a substantial hit due to the loonie fluctuations. And the impact of the Canadian dollar on business profits can be referred to as foreign exchange risk management.
A wide number of trends in the industry are forcing people to consider the foreign exchange risk management strategies, notably looking into globalization and market independence. Globalization should come as no surprise. In the past, few companies had the ability to open its doors to the rest of the world. Though today a vast number are completing business internationally and also beginning to look into free trade between Canada, the U.S and Mexico. Since the 90’s Canadian business has become increasingly interested in international currency trading.
Another trend is market independence. This is down to currency markets being able to generate chain reactions which can affect the value of the Canadian dollar. An example is the rising oil prices. This is caused by uncertainty concerning the US dollar. And since Canada holds little influence concerning a level of confidence involving the main international player on the monetary market. It’s wise for the Canadian companies to take further control of the foreign exchange risk.
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