According to different purposes of holding exchange rate sensitive assets and liabilities, the exchange rate risk exposure of commercial banks is generally divided into trading account exchange rate risk exposure and bank account exchange rate risk exposure.
The foreign exchange transaction record itself is only a transaction record, but it is a powerful tool to analyze the bank's exchange rate risk exposure. Using foreign exchange transaction records and constantly reassessing the market value, we can analyze the exchange rate risks undertaken by banks in time so as to take measures to control and avoid them.
Precautionary measures to avoid exchange rate risk
In order to avoid exchange rate risk, compound interest effect can be used to offset the impact of exchange rate. Yisheng financial experts said that in foreign exchange transactions, during the holding period within one year, the income difference affected by the exchange rate is very significant, and it often shows a downward trend. If the holding period exceeds one year, the income may exceed the exchange rate difference. Moreover, the longer the holding period, the higher the yield and the greater the actual amount.
It is good to avoid exchange rate risks and use futures exchanges to trade and financial products. Investors who hold foreign currency, especially individuals who need foreign currency in the future (such as families with children studying abroad), can lock in the exchange rate through foreign currency forward transactions, thus avoiding the exchange risk caused by large exchange rate fluctuations.