It's pretty cheap from a transaction cost perspective if you use Interactive Brokers. The main cost is the difference in interest rates between the two currencies. With the RMB, there might be other frictional costs due to China's capital controls.
Anyone know how much it costs to hedge $1,000,000 of export contracts used in trade?https://twitter.com/wynot1234/status/1179710870668095488 …
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Is the cost reasonable relative to a manufacturer who may be earning 10-20% margins?
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are you talking about FX futures?https://www.cmegroup.com/trading/fx/emerging-market/chinese-renminbi.html …
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Yes exactly. How do I read it? Trying to get a sense of what % I'd pay on a currency rate lock in for a year on a $1 million in exchange between USD/RMB USD/EUR USD/Any Major Currency.
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The cost is really negligible. The challenge is managing cashflow and liquidity from margin requirements when the market moves in favor of your business/against your hedge. If you want to use options to avoid those dynamics the cost is no longer negligible.
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