Top global charities lost $23.5 million on foreign exchange last year because of problems with hedging their international income and access to often obscure currencies of poor or war-torn nations, research showed on Tuesday. An investigation into alleged market rigging that saw a handful of major banks fined $4.3 billion last month has thrown the spotlight on the FX industry, the source of tens of billions of profit for banks and brokers annually.
Hedging refers to a strategy of offsetting the risk of holding one currency while having liabilities due later in another, and tends to involve forward or other futures contracts to buy or sell the currencies in question. But while a US company can plan how to hedge a future purchase of 100 bulldozers from Germany because it knows when it will make the payment, there is far less certainty in, say, how much charities will receive in dollar donations, the spread of Ebola in west Africa or eruption of civil war in Syria. The report by AFEX, one of the biggest non-bank providers of global payment systems and currency advice to small and medium-sized companies, draws on data from annual reports of 10 major charities and pressure groups.
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