Four common foreign exchange myths

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Don’t let the following common foreign exchange myths steer you away from creating a solid FX strategy.

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Gwen Paddock, senior director, agriculture at RBC is a specialist in agribusiness. Since earning her B.Sc. with a major in agriculture economics she has been working with agriculture clients. A farmer at heart, Paddock was raised on a beef cow-calf farm outside Guelph, Ont.

Related: Can you count on AgriStability?

1. The market can be forecast

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No one can predict exchange rates with absolute certainty as dozens of factors influence FX rates. Forecasts are based on past assumptions that don’t always translate in future.

Related: The 2017 crop input rebate roundup

2. I should make money at foreign exchange

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As a byproduct of your business operations, FX can have an impact on profitability. FX risk management also takes resources away from your core business activity. While FX fluctuations can result in profits, they can also result in losses.

Related: 90 years of Saskatchewan farmland prices

3. My operation is too small for an FX strategy

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No business is too small to protect profits and commonly used strategies are scalable for any size business. A strategy only requires you know your risks and options.

Related: Guarding Wealth: Changes ahead for 2017

4. Quotes from big banks aren’t as competitive as FX boutiques

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Ensure you’re comparing apples to apples. Timing is key; make sure dates, amounts and other critical terms are identical. Quotes must be firm.

Related: How much money is enough?

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