20 Jun 2011

Exporters hedging to deal with high NZ dollar

7:48 am on 20 June 2011

The high New Zealand dollar has caused consternation amongst some exporters, affecting their competitiveness against foreign rivals and eating into returns when converted back into the kiwi.

Despite calls to intervene to deflate the NZ dollar, the Reserve Bank, politicians and most economists say there is little that can be done and it reflects in part the commodity boom and relative strength of the economy.

Hedging is one avenue used by most exporters struggling to deal with the high dollar.

Bancorp Treasury Services senior client adviser Peter Cavanaugh says hedging removes one variable in the transactions because the exporter is selling in a foreign currency rather than in New Zealand dollars.

Mr Cavanaugh says some form of hedging quantifies the amount they are going to receive and therefore sets in place their margin.

He says hedging only buys time until the company can make other more strategic or business-based decisions.

Most exporters would have hedging in place, he says, but the amount they had would depend on the extent of their foreign currency variability.

Exporters would also consider whether have any offsetting exposure, such as importing a certain percentage of their components in the same currency, he says.