PaymentsJournal
SUBSCRIBE
  • Analysts Coverage
  • Truth In Data
  • Podcasts
  • Videos
  • Industry Opinions
  • News
  • Resources
No Result
View All Result
PaymentsJournal
  • Analysts Coverage
  • Truth In Data
  • Podcasts
  • Videos
  • Industry Opinions
  • News
  • Resources
No Result
View All Result
PaymentsJournal
No Result
View All Result

Payments Perspectives: In Trump's Victory, a Vote for the Dollar

Rocco Sannelli by Rocco Sannelli
December 6, 2016
in Industry Opinions
0
0
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

After a surprise outcome, the prospects for the US dollar are suddenly looking a lot brighter—thanks in part to the new administration’s more protectionist attitudes towards the American economy. For multinational companies with dollar-denominated cash flows, a stronger US currency could change the way payables and receivables are handled. With this in mind, we’ve analysed how post-election FX issues could affect corporate payments and transfers in the months ahead.

In a stunning turn of events that very few predicted, Donald J. Trump captured the US presidency last week, sending financial markets into a tailspin at first—followed by a steep rally. The markets’ general enthusiasm appears to have continued into this week as investors warm to the likelihood that a more conservative administration would enact trade policies that favor the US economy. Indeed, this was a central theme of the Trump campaign, and his victory ensures that at least some pro-US policy interventions will become realty in the months and years ahead.

One of the most pronounced effects of Trump’s election has been in the FX market. The US dollar has logged significant gains against many of the world’s developed and emerging market currencies, with major US trade partners like Mexico, Canada and China seeing the greatest impact. The Mexican peso, in particular, saw its largest one-day drop (13%) against the dollar since its sudden devaluation in the “Tequila Crisis” of 1994.

Like Brexit, Trump’s victory is being viewed by some as a resurgence of protectionist trade policies. Still, it is unlikely that the march of global trade will slow very significantly as a result of these events. Companies with international cash flows should take note: a stronger US dollar can both help and hurt the bottom line, depending on the nature of the transaction and currencies involved.

1. Do your research to get a competitive payments provider
Especially in the payments and transfers industry, where any and all portions of a cash flow are vulnerable to exchange rate fluctuations, financial professionals need access to FX rates in near real-time. It is becoming increasingly important for companies to research available options beyond those offered to them by traditional payments providers (i.e. banks and other financial institutions). Increasingly, those alternative providers are furnishing companies with sophisticated technologies and analytics that allow them to track and measure the success of the currency conversion process.

2. Utilize hedging strategies and forward contracts
Companies looking to offset the impact of a stronger US dollar on their cash flows can also look to hedging strategies, which are becoming more popular among corporate finance departments in light of ongoing currency volatility. Forward contracts, for example are a common method that smaller and mid-size companies can mimic the more sophisticated hedging practices employed by larger companies.

While a boon for the dollar, Trump’s victory was just another unexpected turn in an already volatile year. For those involved in moving money across borders, the risks associated with sudden currency rate movements are unlikely to subside in the coming year, even as such black swan events become more the norm.

0
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

    Analyst Coverage, Payments Data, and News Delivered Daily

    Sign up for the PaymentsJournal Newsletter to get exclusive insight and data from Mercator Advisory Group analysts and industry professionals.

    Must Reads

    commercial payments

    Optimizing Commercial Payments in the Digital Age

    March 21, 2023
    cross-border payments

    Cross-Border Payments: Fighting
    E-Commerce Fraud Using Data

    March 20, 2023
    fraud, ChatGPT-4

    How to Fight Fraud While Still Enabling a Great Online Customer Experience

    March 17, 2023
    RTP

    Financial Institutions Without an RTP Strategy Risk Being Left Behind

    March 16, 2023
    visa chargeback

    New Visa Chargeback Guidelines Will Be a Game Changer

    March 15, 2023
    liquidity management

    Liquidity Management Takes on Increasing Importance in Uncertain Economic Times

    March 14, 2023
    payments

    Key Challenges from Growing Payment Methods and Volume

    March 13, 2023
    Data Governance is a Journey, financial data

    How FIs Can Power Their Operations with a Modern Data Architecture

    March 10, 2023

    Linkedin-in Twitter

    Advertise With Us | About Us | Terms of Use | Privacy Policy | Subscribe
    ©2023 PaymentsJournal.com

    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Videos
    Menu
    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Videos
    • Industry Opinions
    • Recent News
    • Resources
    Menu
    • Industry Opinions
    • Recent News
    • Resources
    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Industry Opinions
    • Faster Payments
    • News
    • Jobs
    • Events
    No Result
    View All Result

      Register to download the Autorek complimentary report: Payments Industry Outlook 2023: