Selling £/$ at favourable rates to the forward
Background: A US-based company with operations in the UK has to sell GBP on a monthly basis during 2006. The company has firm commitments for the first six months of 2006, with exposure after that based on earnings’ forecasts.
The company is thus more flexible on any cashflow conversions in the past six months of 2006. At current levels of US- and UK-relevant interest rates, the value of GBP/USD forwards contracts is not attractive to the company.
Based on the company’s forecasted 2006 earnings
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