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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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.
Is the cost reasonable relative to a manufacturer who may be earning 10-20% margins?
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If you're hedging a major currency like EUR or JPY, yes, it's cheap. No idea how much it costs with CNH (offshore Yuan). The danger is that your hedge will move against you at the worst time (during a recession/China shock) and you'll be short on cash to cover any margin calls.
Thanks. Twitter will use this to make your timeline better. UndoUndo
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