Forex woes, rate hike troubles spook Singapore companies in 2H

Hedging is crucial in these tough times.

Domestic firms are troubled over increased exchange rate volatility and the looming interest rate hike, according to a report by HSBC.

To deal with these threats, companies expect to have to work on negotiating better payment terms with suppliers, cut costs internally and source for better interest rates in order to overcome financial risks.

“The regional currencies are already facing pressure from a stronger greenback and the prospects of an imminent US Fed rate hike. Anticipation is strong about when the Fed will raise interest rates and if other central banks will follow suit to devalue their currencies,” said Steven Cranwell, Head of Commercial Banking for HSBC in Singapore.

Despite risks, most companies are still gunning for expansion in the region, with a particular focus on Indonesia and China.

“Amidst this volatile backdrop, companies need to assess their hedging strategies to settle their trade and mitigate the risks, as well as to work on maximising their working capital to realise their growth ambitions,” Cranwell said.