A Jittery World’s Effects on FX

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A Jittery World’s Effects on FX

This month iTreasurer tackles FX management as well as new proposals for hedge accounting from the Financial Accounting Standards Board (FASB). In between we discuss how activists took it easy on companies in 2016, why the US dollar may be heading higher and how more and more companies are bringing supply chains into their cash management universes. Also, our peer group meeting summary this month, the NeuGroup’s Treasurers’ Group of Thirty (T30), discusses cash, taxes and regs.
 
First up on page 1 in “Politics, Uncertainty and FX,” contributing editor and peer group leader Anne Friberg discusses key takeaways from a panel she moderated at EuroFinance in San Francisco in early March. As the story headline suggests, there has been no shortage of politics and uncertainty in the last year and it all has a big impact on currencies. Beginning with Brexit and its fallout and running through to the election of Donald Trump and its fallout, currencies are edgy. For instance, Trump’s election caused the peso to drop and Brexit has beaten up the British pound. Meanwhile, Europe is feeling the wave of nationalism, putting the euro in jeopardy as candidates campaign on possibly following the UK out of the EU. The Dutch didn’t go for nationalism in their recent election but there remains a possibility that France might; and who knows what will happen in Germany. All of which was good fodder for the panel that included Priti Kartik, global treasurer at Logitech; Wolfgang Koester, CEO of FiREapps; and Helen Kane, president of HedgeTrackers.
 
In the peer group summary, T30 members discussed the aftermath of IRS Section 385 threats, which turned out not to be as onerous as thought (though companies are not out of the woods); President Donald Trump’s proposals to lower the corporate tax rate to 15% and a proposed 10% repatriation tax. Also how companies are looking to reduce the costs of hedging.
 
In our Anticipated Exposures section, we discuss how activism against large non-financial US corporates, while increasing in 2016, was slower than the double-digit growth in prior years going back to 2012. Also, how anticipation of President Trump’s promised tax-related policies have propelled US stocks to record highs and are expected to prompt the Federal Reserve to continue rate hikes this year. This would be a boon to corporate treasuries investing cash. However, the Fed may tap the brakes if stocks get too lofty and the buck strengthens too much.
 
On page 11, contributing editor Geri Westphal interviews Mark O’Toole, Vice President Treasury and Commodity Solutions at financial risk technology company OpenLink about the top trends for best-in-class currency and commodity hedging. The crux of the interview centers around how technology is breaking down the barriers or siloed approach that separated treasury from procurement. The fact is, “combining both currency and commodity exposures and the related hedges within the treasury department, corporate treasurers have been able to more effectively manage the company’s risks.” This is far from the historical norm of having treasury manage currency exposures while procurement took responsibility for commodity exposures. But technology has been able to bring the two disparate parts together.
 
Finally, on page 15, contributor John Hintze discusses the impact of the FASB’s latest proposals on hedge accounting. The proposals should bring some relief to corporate hedgers as they seek to more simply hedge their various exposures. 
 
For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com.
 
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