Euro - Shekel: what strategy for hedging volatility?


The volatility of the euro against the shekel is a concern for many people. Currently, the euro is trading at around 4.30 shekels, but it can fluctuate rapidly, which can have an impact on your finances.

Whether you're a call center who works with France, or a Frenchman who wishes to investing in IsraelHow can you hedge against the Euro-Shekel fluctuation?

What to do when the euro reaches 4.30 shekels?

It's important to note that hedging strategies are available to protect you against this volatility. Hedging allows you to guarantee an exchange rate for a given period, which can extend up to two years. For example, if tomorrow the bank offers you a rate of 4.25 shekels to the euro, you can guarantee this rate for up to two years.

To better understand the usefulness of these strategies, let's take an example.

Selling an apartment in France? How can you hedge against the Euro-Shekel rate?

Suppose you are planning to sell an apartment in France worth one million euros. The proceeds of the sale will be received in, say, 4 to 5 months' time, and you plan to make an acquisition in Israel with the proceeds.

Currently, one million euros is equivalent to 4.30 shekels per euro.

However, you don't know how the exchange rate will evolve in the future. It's possible that the euro will lose value against the shekel.

In this case, you might consider guaranteeing part or all of the sale amount for up to two years. This hedge protects you against adverse exchange rate fluctuations, ensuring that you receive a fixed amount in shekels. already guaranteed and determined today.

Do you work with France? How to manage the Euro - Shekel currency pair?

Another situation where hedging strategies can be useful is when you have a business that carries out international transactions. If your business needs to be paid in euros, but you have expenses in shekels, such as employee salaries, you can use hedging to guarantee a favorable exchange rate for a given period.

It's important to note that hedging is not an obligation. If, for example, the euro reaches 4.80 shekels tomorrow, you can always choose not to use your hedging option and convert at the current rate. As your option has a 2-year term (often extendable by a further 2 years), you'll have plenty of time to use it afterwards. And if you don't use it, you lose only the amount of the option, with no exchange obligations.

Conclusion: Guaranteeing the Euro-Shekel rate can be an excellent planning solution.

In short, hedging strategies offer a solution to mitigate the risks associated with the volatility of the euro-shekel exchange rate. Whether you're involved in a real estate transaction or in international business operations, they give you greater control over your finances in an uncertain economic environment.



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Boruch Levenson - CPA

A native English speaker qualified in both Israel and the UK, Boruch cares for the English speaking clients.

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