About Foreign Exchange
Our foreign exchange (FX) services provide clients with access to a range of foreign exchange products and tools to help identify, measure and manage their foreign exchange exposures in compliance with Treasurer’s Instruction 826.
As a partner in satisfying Treasurer’s Instruction 826, WATC assists clients by: ·
- quantifying areas of foreign exchange risk
- designing and implementing foreign exchange risk management strategies and
- providing access to wholesale market pricing.
As a preferred counterparty in the financial markets, WATC has direct access to wholesale foreign exchange markets, multi-currency funds settlements systems, dedicated capital market information and treasury management systems.
Our systems, experience and expertise are made available to clients so they are fully informed of their foreign exchange risks and can make the best decision for their business in terms of materiality and management strategies.
Enquiries
If you would like to discuss any aspect of our products or services, contact details for our team members are available on our Client Services team page, or you can email the team at csoperations@watc.wa.gov.au.
Foreign Exchange Advisory Services
We work closely with our clients to understand their individual business requirements, identify FX risks and ensure they have the right information to make informed decisions on how to manage those risks.
We work collaboratively with our clients to identify and quantify their foreign exchange exposure and assist them to design a risk management strategy that aligns with their individual business goals.
WATC’s foreign exchange services include:
- Risk management advice – identification, measurement and structuring of tailored client solutions to manage FX risk in procurement, specific projects and revenues.
- Transaction services – execution, settlement (payment and confirmation) and valuation reports.
- Financial Modelling – provision of quantitative measures of FX risk (in the form of probabilities, currency rates and diagrams), to assist clients to make informed decisions regarding their currency risk management strategies.
- Policy advice – assistance with the development and/or review of treasury risk management policies to establish internal guidelines for client FX management.
- Education – provision of in-house training sessions and materials to increase awareness of FX risk and how it can be managed.
Ongoing management of credit risk associated with long-dated foreign exchange contracts can be a significant issue for many organisations. When WATC undertakes foreign exchange transactions for a client, the client’s exposure is to WATC – a AAA / Aaa rated, government guaranteed entity. It is WATC, in its transaction with the financial markets, that assumes and manages the credit risk with market counterparties.
Before WATC can undertake foreign exchange transactions for a client, the client must execute a Foreign Exchange and Derivatives Master Agreement. The agreement has been specifically designed to reduce clients’ operational risks in dealing with foreign exchange contracts through the inclusion of stringent process controls at all stages of a foreign exchange transaction, including standard settlement instructions, authorised signatories and transaction confirmation protocols. The agreement sets out the responsibilities of both WATC and the client in relation to requesting, settling and confirming foreign exchange transactions.
Foreign Exchange Products
The exchange of one currency for another at the prevailing market rate (the spot rate). Cash flow will occur two business days following the transaction date.
The exchange of one currency for another at a predetermined future date, where the rate of exchange is agreed today (the forward rate). Forward transactions have no up-front cost.
The right (but not the obligation), to buy (call option) or sell (put option) an agreed amount of one currency against another currency on a specified date (exercise date), at an agreed rate of exchange (strike price). Option transactions will usually have an up-front cost (premium).
Learn More
WATC presents a series of foreign exchange educational seminars which are available to Western Australian public sector agencies and local governments. These seminars promote awareness and understanding of foreign exchange risk management issues.
These seminars can be provided for and tailored to individual clients. If you are interested in attending a foreign exchange seminar or would like to discuss the potential of WATC conducting a foreign exchange seminar for your organisation, please contact our Client Services team.
Focus on how FX impacts the procurement process - Suitable for anyone currently managing FX payments, project managers with multi-currency exposures, procurement personnel or for new or support staff who have no prior experience and would benefit from greater awareness and knowledge regarding FX.
Greater focus on managing FX exposures through hedging - Suitable for project and finance teams tasked with managing project cash flows which have foreign currency exposures. Participants are expected to have attended the Procurement Series seminar and/or have experience in foreign currency payments and management.
Bespoke session tailored to your organisation - Tailored sessions provide the opportunity to delve into past or live examples of managing FX exposures which are related to a specific organisation. These sessions provide attendees the freedom to ask questions about specific examples which would not be discussed with attendees outside their organisation.
Banner images:
Top - Port of Port Hedland. Image courtesy of Pilbara Ports Authority.
Below - Elizabeth Quay, Perth. Image courtesy of Tourism Western Australia.