September 17, 2019

Small-Business Guide: Businesses Going Abroad Learn to Master Currencies

Based in San Francisco, the 31-year-old company books trips to Bhutan, Tibet, Central Asia, Patagonia and the Galápagos Islands months or even more than a year in advance. In late 2006, Mr. Tennant had booked travel for eight clients who wanted to explore northern India. Then the rupee began a double-digit climb against the dollar, which prompted one Indian supplier who had already agreed to fees for hotel rooms, guides and drivers to say he needed to raise his prices. Suddenly a trip costing Geographic Expeditions $7,500 per person was going to jump to $9,000.

“As soon as we commit to a price, we are heavily exposed if we don’t know what our costs will be,” Mr. Tennant said. “It can totally kill a company like ours.” He quickly canceled the contract and found another supplier that agreed to a firm quote.

As more small companies conduct business overseas, owners are learning that volatile exchange rates can cut into profits. More of these businesses are using banks and international payment companies and creating risk management strategies that mimic those of large concerns.

Mr. Tennant said he now worked with experienced global currency traders who help Geographic Expeditions conduct transactions and lock in costs. The strategy has helped his company of 45 employees grow to expected sales of $27 million this year.

These are some tips for conducting business in foreign currencies, based on the experiences of small-business owners like Mr. Tennant.

EXTEND THE QUOTE PERIOD Many American businesses pay their overseas vendors in the local currency. But not all business owners have the time or expertise to figure out how to avoid being hit by a sudden change in the exchange rate.

Craig T. Batten is chief financial officer of S4 Inc. in Toano, Va., which imports and sells $8 million in holiday lights a year. Four years ago, the company was so small that he could not find a bank to help him, so Mr. Batten worked alone, getting quotes from Chinese manufacturers that were paid in dollars. He would make a deposit of up to 50 percent of the order when he placed it, with the balance due when the product was shipped. Quotes would be valid for up to 90 days. After that, the vendor would deliver a new quote, which was time-consuming and could force S4 to update its prices.

Now working with Citizens Bank, Mr. Batten said he got quotes six months in advance and could pay in the local currency, the renminbi.

“The U.S. dollar has been losing value compared with the renminbi,” Mr. Batten said. “The two places I deal with will hold prices for a longer time and quote better prices because they’re not hedging on the loss of the U.S. dollar.”

The bank saves him money, he said, because he has been able to develop relationships with their representatives, who look out for him. “They often reduce the wire transfer fees when dealing with funds outside of U.S. dollars,” he said.

WORK WITH A TRADER Adriana Kahane, founder and chief executive of Dream Foods International in Santa Monica, Calif., depends on a currency trading company to help her business import organic citrus juices from Sicily. Dream Foods tallies about $6 million a year in sales.

When she started in 1998, Ms. Kahane relied on a big bank to buy currency to carry out transactions. She would place an order 90 days or more in advance, committing to buy, say, 75,000 euros on a certain date to pay a supplier. When the date came, even if she did not need the product at that moment, she was obligated to buy the currency. That became a problem during the recession, she said, when “we were a little bit squeezed on our margins because of the high cost of the euro.”

Five years ago Ms. Kahane started using Associated Foreign Exchange, or AFEX, an international payment and foreign exchange company in Los Angeles. She said the company had been willing to give her extra days before she was committed to buying euros. The AFEX representative calls her regularly when he sees the euro’s value dropping and knows she may want to make a purchase. She said that had helped Dream Foods save as much as $100,000 in a year.

Article source: http://www.nytimes.com/2013/04/18/business/smallbusiness/businesses-going-abroad-learn-to-master-currencies.html?partner=rss&emc=rss

Iran Currency Falls Further on Concerns Over Bank

The career of the Central Bank’s governor, Mahmoud Bahmani, appeared to be in jeopardy, and with it the short-lived stability for the currency, the rial, after a drop in value last year of roughly 50 percent.

Most of that decline came in October in a frenzy of speculative selling by Iranians worried that rapid inflation could render their money worthless. The government responded with a crackdown in which some money traders were arrested.

But reports in Iran on Sunday that Mr. Bahmani suddenly wanted to retire, followed by news reports on Monday that he had been discharged after a parliamentary inquiry on improper withdrawals by the Central Bank, appeared to lay the groundwork for new fiscal anxieties.

While Iran does not publicize exchange rates in unofficial trading, Reuters quoted currency traders in Dubai, United Arab Emirates, as saying it cost as much as 36,250 rials to buy a dollar on Tuesday, compared with 33,000 on Sunday.

“Without reliable official information, any change in Tehran’s political winds spooks the public, and they sell rials,” said Steve H. Hanke, an economics professor and currency expert at Johns Hopkins University.

Mr. Bahmani, a disciple of President Mahmoud Ahmadinejad, is widely associated with the demise of the rial, which traded at about 10,000 to the dollar a few years ago. He has been criticized in Parliament, where many lawmakers consider the administration economically incompetent.

The rial’s weakness also reflects the impact of sanctions over Iran’s nuclear program, most notably the European oil embargo and the cutoff of access to global capital and credit markets. Iranian officials, who say their nuclear program is peaceful, have acknowledged that sanctions contributed to a 50 percent drop last year in oil exports.

The Mehr news agency reported that on Sunday, Mr. Bahmani had asked the president’s permission to retire. Mr. Ahmadinejad rejected the request. The same day, Parliament decided to investigate the Central Bank, including the “Overnight Withdrawals” scandal, in which the Central Bank withdrew several billion dollars from Iranian banks last March.

The intrigue deepened Monday when Mehr reported a parliamentary financial oversight body had ordered Mr. Bahmani’s dismissal, saying the Central Bank had “illegally withdrawn money from certain state and private banks without notifying them in advance.” A court spokesman told Mehr that Mr. Bahmani had appealed the ruling.

The International Islamic Awakening News Agency quoted Mr. Bahmani as saying he was being punished because he was fighting fraud. “Some gentlemen see their interests in danger, that is why they have created this situation,” he was quoted as saying.

Thomas Erdbrink contributed reporting from Tehran.

Article source: http://www.nytimes.com/2013/01/23/world/middleeast/iran-currency-falls-further-on-concerns-over-bank.html?partner=rss&emc=rss