Trade Finance Article Trade Finance Article

Lower charges for trade finance

30 November,2018

Export Trade Finance

PrimaDollar’s pricing calculator has been updated with lower charges for many trades. Click here to go to our online calculator. You can price your trades in real time.

PrimaDollar is here to help you. We know how to manage the increasing volatility of international markets.

Our low cost, collateral-free trade finance can help to reduce the impact of higher US$ interest rates and big movements in exchange rates.

We are your local experts in export trade finance, export credit and letter of credit LCs.

Click here to get in touch.

Here are some brief notes on the factors driving interest rates higher and causing exchange rates to move around.

1. Donald Trump:

  • Whether we like him or not, “the Donald” makes things more volatile.

  • The Turkish lira has dropped 25% against the US$, principally on the back of limited executive actions taken by the Trump administration.

BUT what does this mean for you?

  • Increasing volatility makes it important to focus on the timing of cash flows in trades.

  • Giving trade credit to your buyers yourself can mean taking a significant credit risk. If an importer buys in US$ with credit but sells in local currency, a big exchange rate move can bankrupt him quickly.

2. US$ interest rates:

  • The US Federal Reserve is reducing US$ liquidity and raising interest rates to control domestic US inflation.

  • Short term US$ bank rates ("libor") are now over 2.5%.

But what does this mean for you?

  • Exporters who provide trade credit to their buyers in US$ should be ready for an increase in the cost of finance.

  • In a low margin business, this can be significant.

3. Currency depreciation versus the US$

  • One response to trade tariffs imposed by the US is to allow currencies to depreciate in order to restore competitiveness.

  • In the last 60 days, the Chinese Yuan has gone from 6.5 to the US$ to nearly 7 to the US$. This is a major move.

  • Currency depreciation is only a short-term fix. In time, governments will raise their own local interest rates to manage the resulting domestic inflation and take back control over their currency.

BUT what does this mean for you?

  • Higher interest rates in local markets are likely arriving quicker than you may think. Your local cost of debt is going to rise.

  • Providing trade credit to your buyers yourself may no longer be efficient.

PrimaDollar is here to help.

PrimaDollar is present in the world’s major markets on both import and export sides.

We are seeing already the factual consequences of the above. Talk to us about how to manage your trading business going forward.

Reduce your risks, improve your customer service.

Take advantage of our expertise and low cost, collateral-free export trade finance.

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