$€£¥
Pre-Priced Parts, Dollar Weakening
How an automotive parts supplier locked in rates to protect margins on MXN exposure
Industry:Automotive
Client:Illinois-based automotive parts supplier
Region:United States
Exposure:8.9M MXN
Hedge Ratio:100%
8.9M MXN
Exposure
100%
Hedge Ratio
2 Months
Forward Term
Background
An Illinois-based automotive parts supplier negotiated a parts purchase from a Mexican vendor in MXN, then priced components in USD for resale. The Mexican peso had been strengthening against the dollar, eroding expected profit margins.
Products Used
Fixed-Date Forward
Challenge
- Complete invoice payment due within two months
- Mexican peso strengthening against the dollar, eroding margins
- Parts already priced in USD for resale — no ability to adjust prices
- Company awaiting vendor credit before having sufficient funds
Strategy
- Executed an 8.9M MXN (100%) fixed-date forward closing at a pre-determined date 2 months out
- Locked in the exchange rate to prevent further losses
- Aligned forward maturity with expected payment date
- Protected remaining margin despite adverse currency trend
Outcomes
- Locked in exchange rate preventing further margin erosion
- Saved significantly versus waiting until invoice due date at spot rate
- 100% of exposure hedged with a single instrument
- Simple, clean execution with no ongoing management required
Download This Case Study
Get the full case study as a PDF for your records or to share with your team.
Ready to Write Your Success Story?
Talk to our team about how Monex can help your business save on FX, reduce risk, and simplify payments.
Get a Free Consultation