SA importers stick with spot rates

Euro volatility has so far failed to shake South African importers from their longstanding preference for buying currency at spot rates, according to foreign currency specialists at Bidvest Bank. Greek debt, concerns about possible ‘contagion’ across other Eurozone countries, and sometimes-contradictory positions on bailout packages have contributed to weeks of euro-rand volatility, says Ion de Vleeschauwer, Bidvest Bank’s chief currency dealer. Euro skittishness was expected to drive much bigger recourse to the South African Reserve Bank’s dynamic hedging facility – a tool that makes it easy for buyers of foreign currency to lock in rates for up to six months. “It’s not happened yet,” says De Vleeschauwer. “Most of our importer customers are content to take the spot rate. Buyers pay a premium for a lock-in, so you don’t expect big uptake in stable market conditions, but as the eurorand rate became increasingly volatile, we anticipated much greater demand for the new facility. “We have seen greater take-up, but it’s been gradual.” Since early June, the euro has moved in a band between R9.55 to just short of R10. Over a similar period the spot versus lock-in split between corporate buyers of euro has moved from approximately 80/20 to 70/30. “Buying at 9.55 or 9.90 makes a big difference to an importer’s profit potential,” notes De Vleeschauwer. “Over time, this will motivate increased enquiries from our customers. “We have decided to be proactive and have instructed our business development and relationship managers to make market education on the SARB’s dynamic hedging facility a priority.” Bidvest Bank assigns a relationship manager to every corporate account, enabling one-on-one client service. De Vleeschauwer adds: “The SARB introduced the lock-in option some months ago during a period of rand stability. We therefore expected a slow response, but if uncertainty takes hold on world markets you can expect demand for this facility to take off. South Africans will not risk significant loss on big market swings.”