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Managing FX Risk in the Commodities Sector

Managing USD/CAD Risk In The Commodities Sector

Hamilton Court has over a decade’s experience working alongside companies in the commodities sector, providing them with the expertise, guidance, and support to manage their foreign exchange risk.
Our dedicated team of professionals ensures that our service is aligned to unique needs of clients in the industry and our emphasis on building longstanding relationships enables us to develop a deep understanding of each company’s specific requirements.
Whether your commodities focused company is exposed to foreign exchange though actuals or ancillaries, forestry, or fuels, we tailor make solutions by utilising a range of products from simple hedging strategies to regulated structured products. We design everything around your needs.

Our client is an Ontario-based oil and gas production and exploration company conducting upstream and downstream
services. While the vast majority of its revenues are denominated in USD, its reporting currency, functional costs and
payroll are all CAD based. It therefore has an underlying requirement for FX services and is exposed to significant FX risk given USD/CAD volatility.
Given wholesale oil and gas price movements, our client’s revenues are subject to external market forces, and thus fluctuate accordingly. As such, notwithstanding forecasts, an absence of precise cash flow visibility for our client means that flexibility is of the utmost importance.

Introduction to Hamilton Court

Before partnering with Hamilton Court, our client traded with their banking counterparty and had little support and flexibility as far as FX was concerned.

Subsequent dialogue and meetings with a team of specialists on Hamilton Court’s Canadian desk enabled us to get a firm understanding of the challenges that our client faced as well as the importance that FX played in the company’s operations and their need for flexibility.

Our expertise in the FX industry and knowledge of nuances in commodities sector enabled us to assess their specific requirements and provide the advice, guidance, and support to manage their FX risk and implement effective solutions.

Our client was also supported in the knowledge that their dedicated account manager would always remain on hand to execute trades, ensure timely payments are made and provide them with the latest in fundamental data, technical analysis and reporting requirements.

Our client also took comfort in the fact that Hamilton Court’s extensive panel of liquidity providers ensured access to favourable USD/CAD rates and offered liquidity in over one hundred currencies across major, minor, and exotic pairs.

Providing Solutions: Our Client’s Partnership With Hamilton Court

Conclusion

Our client’s use of layered hedging and market orders to target higher rates enabled them to reduce the cost of hedging while taking advantage of upside moves. The flexible forwards also ensured that the client could draw down or roll over the funds according to specific cashflow requirements which they could not have foreseen at the time of executing trades. Hence, the effective management of the client’s foreign exchange exposure continues to assist their treasury function as well as their bottom line.

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