From time to time, business people are confronted with the question of where future interest rates or foreign currency values

will be.

If you have asked yourself these questions, and if the outcome could impact the net income of your business, you should 

consider hedging your various exposures as an appropriate and prudent step.

Hedging limits the risk of a financial (interest rate or foreign currency) exposure by entering into a counter-balancing transaction.

If you borrow on a floating rate basis, you might consider entering into an interest rate swap to convert your floating rate liability into a fixed rate liability. This transaction is appropriate if you expect interest rates to move higher. Another strategy is to purchase an interest rate CAP.

Similarly, if you are in the import/export business, changes in the value of foreign currencies can have an effect on your profit. If you sell your good overseas and expect to be paid in the foreign currency in ninety days, any fall in the value of that currency will reduce your income. This risk can be easily hedged by selling the foreign currency today in the forward market. This foreign exchange hedging transaction locks in the margin on the goods sold and eliminates your exposure to adverse movements in the foreign currency.

These are just a few examples of the financial risks that your company may wish to hedge. The experts in our Treasury Department have helped many customers structure such transactions and are eager to apply their knowledge to your particular needs.

Please contact your Bank Leumi USA relationship manager to discuss these matters in more detail.