Treasurers in the Face of New World Currency Turmoil

Posted 4 Feb. 2022 at 9:09Updated 4 Feb. 2022 at 9:34

In 2021, the euro experienced a general weakening movement against most emerging currencies. It fell 6% against the ruble and the Indian rupee, and 1.5% against the Brazilian real. A major exception, it jumped 66% against the Turkish lira: the euro moved between 8.4 and 18.50 pounds, a record in terms of amplitude and testimony to the extreme volatility of certain emerging currencies. European groups must pay a high price in terms of risk to access the growth of the New World.

Unlike professional speculators (hedge funds) or amateurs (individuals), companies do not seek to make profits on currencies. In 2021, they did not take the risk of buying a sinking currency like the Turkish lira to take advantage of its fall. “In situations of extreme volatility like in Turkey, treasurers are very reluctant to intervene given the risks. We have witnessed inter-company loan operations, where the parent company lent dollars or euros to its Turkish subsidiaries, “says Séverine Prizer, head of sales for corporate customers at Citi for France, Belgium and Luxembourg. The Ferrero group, which imports its hazelnuts from Turkey for the manufacture of Nutella, took advantage of the fall in the Turkish lira against the euro. But the crisis in Turkey could lead to a sharp drop in production and a rise in prices for this commodity.

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