Amidst Currency Volatility, Forward Contracts Matter Now More Than Ever

This past weekend, the New Taiwan Dollar (TWD) experienced its most significant surge against the U.S. Dollar (USD) since the 1980s, appreciating nearly 10% over two days.

This is part of the broader trend of currency volatility across Asia, particularly ASEAN currencies. Driven by geopolitical tensions, fluctuatingU.S. trade policies, and domestic fiscal uncertainties, these fluctuations pose significant risks to businesses engaged in international trade, affecting pricing, budgeting, and profitability.

Currency Volatility Across ASEAN Economies

Indonesia – Indonesian Rupiah (IDR)

• USD/IDR High: 16957
• USD/IDR Low: 16130  
• % Change: 5.13%

Thailand – Thai Baht (THB)

• USD/THB High: 34.98
• USD/THB Low: 32.603
• % Change: 6.8%

Malaysia – Malaysian Ringgit (MYR)

• USD/MYR High: 4.5192
• USD/MYR Low: 4.1873
• % Change: 7.34%

Philippines – Philippine Peso (PHP)

• USD/PHP High: 58.723
• USD/PHP Low: 55.235
• % Change: 5.94%

Singapore – Singapore Dollar (SGD)

• USD/SGD High: 1.3751
• USD/SGD Low: 1.2862
• % Change: 6.46%

While ASEAN currencies have been volatile, the broader trend has been one of strengthening relative to the USD. While the shifts may appear modest tothe untrained eye, even a 1% swing can have a meaningful impact on costs for importers, exporters, and companies managing foreign currency-denominated payroll or supplier payments.

Consider an Indonesian importer who signed a contract on 6th March to pay USD 1 million on 9th April 2025. Over that one-month period, the IDR weakened from 16,273 to 16,950. As a result, the company would need to pay an additional IDR 677 million to fulfill the same USD obligation. Had the importer hedged using a forward contract to purchase USD 1 million for value on 9th April 2025 at the then-indicative forward rate of 16,298, they would have saved approximately IDR 653 million.

Why Forward Contracts Matter

Currency volatility is a fact of life in today’s globalised market. But exposure to it doesn’t have to be. This is where forward contracts come into play.

A forward contract allows businesses to lock in an exchange rate for a future date—anywhere up to a year ahead—offering certainty in cash flows and shielding them from adverse currency movements.

Here’s how forward contracts help mitigate risk:

• Rate Certainty: Lock in FX rates to avoid spikes that might occur before your invoice settles.
• Budget Control: Protect your profit margins on known receivables or payables.
• Peace of Mind: Focus on your operations, not the market noise.

Navigating the Volatility Ahead

With ongoing geopolitical tensions and economic uncertainties, currency volatility is likely to persist. Businesses engaged in international trade, should proactively assess their exposure and consider implementing hedging strategies like forward contracts to protect against potential financial impacts.

Even if the rate moves in your favour, relying on luck is not a strategy. A disciplined approach using forwards, and potentially layered hedging structures, is a far more sustainable way to manage foreign exchange risk.

Final Thoughts

Currency risk can materialise quickly and unexpectedly. While no one can predict the markets, businesses can and should prepare. Forward contracts remain one of the most straightforward and effective tools to do just that.

Learn more about Forward Contracts with 4XPro

If you’re exposed to multiple currencies, now’s the time to review your hedging strategy. Because in FX, it’s not just about gains; it’s about protection.

Interested in learning more about protecting your business with forward contracts?

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