Glossary

Definition

The accounting currency is the monetary unit a company uses to record its financial transactions and present its financial statements — also referred to as the reporting currency or presentation currency.

Why it matters

For any company operating across multiple countries, the choice of accounting currency sits at the heart of how financial performance is communicated to shareholders, regulators, and internal stakeholders. Because foreign-currency revenues, costs, and balance sheet items must ultimately be expressed in a single currency, the accounting currency determines how exchange rate movements show up — or don't — in reported results.

This is not a purely technical accounting decision. Exchange rate fluctuations between a company's functional currency (the currency of its primary economic environment) and its accounting currency can create significant volatility in reported earnings, even when the underlying business is performing well. A European exporter reporting in euros, for instance, may see its consolidated financials shift materially from quarter to quarter purely due to USD/EUR movements — without a single change in commercial performance.

Accounting currency vs. functional currency

The two terms are often used interchangeably, but they are distinct concepts. The functional currency is the currency in which a company primarily generates and expends its cash — it reflects economic reality and cannot be changed simply by management choice. The accounting currency, by contrast, is the currency in which financial statements are presented. In most cases they are the same, but a company may choose a different accounting currency — for example, when preparing consolidated reports for a parent entity domiciled in another country.

This distinction matters for FX risk management: translation risk arises precisely when a subsidiary's functional currency differs from the group's accounting currency, causing balance sheet and income statement items to fluctuate when restated.

Implications for FX risk management

Understanding your accounting currency is the necessary starting point for identifying which FX exposures require hedging. Companies need to map each foreign-currency cash flow back to the accounting currency to understand their true exposure — whether that is transactional risk (arising from individual invoices or payments), economic risk (arising from competitive dynamics), or translation risk (arising from the consolidation of overseas subsidiaries).

Automation plays an increasingly important role here. When hedging programmes are linked directly to ERP and treasury data, companies can ensure that every foreign-currency transaction is assessed, hedged, and reported in relation to the accounting currency in a consistent, auditable way.

• To understand how currency exposures feed into financial reporting, see Hedge Accounting Module — audit-ready hedge accounting reporting, integrated with your treasury workflows.
• Learn how automated hedging programmes protect reported results from exchange rate volatility: How Kantox Dynamic Hedging® works

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Accounts Payable

Accounts payable are short-term liabilities that arise when a company purchases goods, supplies, or services on credit — creating an obligation to pay a supplier at a future date.

When a business buys from an overseas supplier in a foreign currency, that obligation does not sit quietly on the balance sheet. From the moment the invoice is received to the moment payment is made, the amount owed in the company's functional currency fluctuates with exchange rate movements. A payable recorded at one rate may ultimately be settled at a significantly different one — and that gap flows directly through the income statement as a foreign exchange gain or loss.

How accounts payable work in practice

Accounts payable are typically recognised on the balance sheet at the point an invoice is received, not when payment is made. They are classified as current liabilities and generally carry no interest, distinguishing them from longer-term debt obligations. At each reporting date, any foreign currency payables must be revalued at the closing exchange rate — a process that can produce material unrealised FX gains or losses, depending on how the currency has moved.

Why accounts payable matter for FX risk management

For any company with international suppliers, accounts payable are a primary source of balance sheet FX exposure. Left unhedged, they introduce volatility into reported earnings that has nothing to do with the underlying business performance — a problem that CFOs and auditors alike are keen to eliminate.

This is where micro hedging becomes relevant. Together with accounts receivable, accounts payable are the key inputs when a company hedges balance sheet items at the individual transaction level. In a micro hedging programme, each foreign currency payable is matched with a corresponding hedging instrument — typically an FX forward — sized and timed to offset the revaluation risk on that specific liability. The goal is straightforward: ensure that what is owed in foreign currency translates to a predictable amount in the functional currency, regardless of how the market moves between invoice date and settlement.

Learn how micro hedging programmes work in practice: Balance Sheet Hedging

Automating this process — identifying payables, calculating exposure, executing hedges, and maintaining hedge accounting documentation — is precisely where Currency Management Automation software adds the most value. Manual workflows leave gaps; automation ensures that every eligible payable is captured, matched, and hedged consistently.

See how Kantox automates the hedging of foreign currency payables and receivables: Kantox Dynamic Hedging®.

Balance sheet hedging is a hedging programme designed to protect the value of a company's foreign currency-denominated assets and liabilities from exchange rate fluctuations, with the specific aim of minimising accounting FX gains and losses on the financial statements.

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Why it matters

For any company that holds monetary items in foreign currencies — receivables, payables, intercompany loans, or cash balances — exchange rate movements between the transaction date and the settlement date create what accountants call accounting exposure, also known as translation exposure. When rates move unfavourably, these positions generate FX losses that flow directly through the profit and loss (P&L) statement, even if the underlying commercial activity is perfectly sound. Balance sheet hedging exists to reduce this effect, giving finance teams cleaner, more predictable financial statements.

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How it works

At the end of each accounting period, a company identifies its net open FX-denominated positions — typically by currency pair — and places offsetting forward contracts or other instruments to lock in the exchange rate on those positions. When rates move, gains or losses on the hedge offset the revaluation effect on the underlying balance sheet items, resulting in a significantly reduced net P&L impact.

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It is important to understand what balance sheet hedging does not do. Because accounting exposure arises after a transaction has already been priced and recorded, this programme does not protect a company's commercial profit margins from currency risk. That is the role of economic or budget-rate hedging. A well-designed FX risk management strategy typically combines both: budget hedging to safeguard margins at the point of pricing, and balance sheet hedging to keep the financial statements free of FX noise.

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Combining balance sheet hedging with other programmes

In practice, companies rarely run balance sheet hedging in isolation. It works best when combined alongside budget hedging programmes — whether static, rolling, or layered — and programmes that hedge firm commitments. The goal is a coherent, end-to-end approach to currency risk that addresses exposure at every stage of the commercial cycle: from the moment a price is set, through to settlement.

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Currency Management Automation makes this combination significantly more manageable. Rather than running each programme manually, companies can automate the identification of open positions, the execution of hedges, and the reconciliation of results — reducing both operational risk and the burden on treasury teams. You can read more about how these programmes interact in our deep-dive on balance sheet hedging strategy in currency management.

• Explore how to reduce FX gains and losses with Currency Management Automation.
• Learn how Kantox Dynamic Hedging® supports automated hedging programmes across the full commercial cycle.

Cash collection is the treasury process by which a company recovers funds owed by customers or counterparties following the issuance of an invoice — with the core objective of ensuring invoices are settled on time and in full.

Why it matters

Effective cash collection is fundamental to a company's working capital health. When invoices go unpaid past their due date, cash that should be available to fund operations, investments, or hedging activity remains trapped in receivables. For finance teams, this creates a compounding challenge: not only does liquidity suffer, but the risk of debts turning doubtful or irrecoverable grows with each passing day. Getting cash collection right is therefore not merely an administrative task — it is a core discipline of treasury management.

How the process works

The cash collection cycle typically begins the moment an invoice is issued to a buyer, whether a B2B customer or a distributor. The process spans several stages: communicating payment terms, monitoring due dates, following up on overdue invoices, managing new settlement arrangements where necessary, and reconciling received payments against open items in the accounts receivable ledger.

For companies with high transaction volumes — for example, those operating across multiple markets or currencies — manual management of this cycle quickly becomes unwieldy. Human error in reconciliation, delays in identifying overdue accounts, and the administrative burden of chasing payments across time zones all erode efficiency. This is why software-based automation is increasingly central to modern cash collection practice.

The FX dimension

For businesses that invoice customers in foreign currencies, cash collection carries an additional layer of complexity: currency risk. When a company issues an invoice in euros, dollars, or any other currency that differs from its functional currency, the value of that receivable in home-currency terms fluctuates between invoice date and settlement date. The longer the collection cycle, the greater the potential for exchange rate movements to erode the margin the company originally priced into that transaction.

This is the intersection where treasury and FX management converge. Automating the handling of foreign currency collections — matching incoming payments to the correct hedges, converting proceeds at pre-agreed rates, and reconciling everything without manual intervention — is precisely where Currency Management Automation adds tangible value.

Kantox's Payments & Collections solution is designed to automate incoming and outgoing FX payments, mitigating the manual effort traditionally associated with multi-currency reconciliation. For companies looking to manage the broader exposure that arises from foreign currency receivables, understanding how collections integrate with a hedging programme is equally important — explored in detail in the use case on reducing long-term cash flow variability.

A foreign exchange gain or loss (also written as FX gain or loss) is the financial impact that arises when a transaction is recorded at one exchange rate and subsequently settled or reported at a different rate.

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For any company that invoices customers or pays suppliers in a foreign currency, exchange rates rarely stay still between the moment a transaction is booked and the moment it is settled. That gap — days, weeks, or even months — is where FX gains and losses are born. If the rate moves in your favour, you record an FX gain. If it moves against you, you record an FX loss. Either way, the outcome is outside your control unless you actively manage it.

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Unrealised vs Realised FX Gains and Losses

FX gains and losses fall into two categories that matter both operationally and for financial reporting:

• Unrealised FX gain or loss — arises when open foreign currency transactions (invoices not yet paid or received) are revalued at the exchange rate prevailing on the balance sheet date. The gain or loss exists on paper but has not yet been settled in cash.
• Realised FX gain or loss — arises at the point of settlement, when the invoice is actually paid and the exchange rate at settlement differs from the rate at which the transaction was originally recorded. At this point, the gain or loss moves from unrealised to realised and flows through the profit and loss account.

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Why FX Gains and Losses Matter to Finance Teams

Even a company with healthy commercial margins can see its profitability eroded by unmanaged FX exposure. For mid-to-large businesses operating across multiple currencies, the cumulative effect of exchange rate movements on accounts payable and receivable can be significant — and unpredictable. This volatility makes forecasting harder, complicates budget-setting, and introduces noise into financial statements that makes it harder to assess true operating performance.

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Finance teams often distinguish between transaction exposure (the risk on individual invoices) and translation exposure (the broader effect of revaluing foreign currency assets and liabilities at period end). Both feed into the FX gain and loss line on the income statement.

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How Businesses Reduce FX Gains and Losses

The most direct way to limit FX gains and losses is through hedging — using forward contracts or other financial instruments to lock in an exchange rate for a known future transaction. However, managing hedges manually across dozens or hundreds of transactions is operationally intensive and prone to error.

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Currency Management Automation removes that burden by automatically linking FX hedges to individual trades as soon as they are priced or invoiced, ensuring that exposure is covered at the transaction level before it can become a problem. This approach — known as micro-hedging — is particularly effective at minimising the FX gain and loss line by reducing the time between when an exposure arises and when it is hedged.

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• See how businesses use micro-hedging to reduce FX gains and losses‍
• Explore Kantox Dynamic Hedging® to see how automated hedging works in practice

The Financial Conduct Authority (FCA) is the independent regulatory body responsible for overseeing the conduct of financial services firms in the United Kingdom, across both wholesale and retail markets.

Why does the FCA matter for businesses with FX activity?

For any company working with UK-based financial services providers — whether for currency hedging, cross-border payments, or FX derivatives — confirming that the provider is FCA-authorised is not a formality: it is a fundamental safeguard. FCA authorisation means the firm is subject to enforceable standards around client fund protection, transparency of execution, and fair treatment of customers.

The FCA is funded entirely through levies paid by the firms it regulates, which ensures its independence from both government and the markets it supervises. That structural autonomy underpins its credibility as a conduct authority.

Origins and regulatory framework

The FCA was established in 2013 as the successor to the Financial Services Authority (FSA), which was abolished under the Financial Services Act 2012. That reform introduced a twin-peaks model of financial supervision in the UK: the FCA took on responsibility for market conduct, whilst the Prudential Regulation Authority (PRA) — operating under the Bank of England — assumed oversight of the prudential health of systemically important banks and insurers. The Financial Policy Committee (FPC) completed this new regulatory architecture.

Key powers

The FCA holds a broad set of supervisory and enforcement powers, including:

• Product intervention: the authority to ban a financial product or service for up to twelve months whilst it assesses the case for a permanent prohibition — enabling swift action when consumer harm is identified.
• Conduct supervision of banks: ensuring fair treatment of customers, promoting healthy competition, and identifying financial risks before they escalate into systemic damage.
• Authorisation and registration: all firms providing financial services in the UK must be authorised or registered by the FCA. This covers banks, asset managers, payment institutions, and currency management providers.

The FCA and FX service providers

When a business engages a specialist provider for currency hedging or FX management, the FCA's conduct framework sets the standards that provider must meet: best execution obligations, client money safeguarding rules, and clear disclosure requirements. Checking that a provider is properly authorised — via the FCA's public Financial Services Register — is a straightforward but essential step in any treasury due diligence process.

Kantox Limited is authorised and regulated by the FCA under reference number FRN: 580343, as a Payment Institution under the Payment Services Regulations 2017.

A fixed exchange rate is a monetary policy arrangement in which a country's central bank pegs the value of its currency to another currency, a basket of currencies, or a reference asset such as gold, in order to limit exchange rate volatility and provide a stable economic environment for trade and investment.

Why do countries adopt fixed exchange rates?

Exchange rate volatility is one of the most destabilising forces an open economy can face. For smaller or trade-dependent economies — particularly in Latin America, sub-Saharan Africa, and parts of Asia — sudden swings in currency value can trigger imported inflation, erode export competitiveness, and deter foreign direct investment almost overnight.

A fixed exchange rate removes much of that uncertainty. By anchoring the local currency to a more stable external reference — typically the US dollar or euro, though pegs to currency baskets also exist — a country signals predictability to businesses and investors alike. Prices for imported inputs remain more stable, export revenues become easier to forecast, and foreign investors face lower currency-related risks on their domestic holdings.

The benefits in practice

Beyond macroeconomic stability, fixed exchange rates offer three concrete advantages. First, they support export planning: businesses trading with the pegged-currency partner know that pricing decisions today will not be undermined by exchange rate moves tomorrow. Second, they attract foreign capital: a stable currency reduces the risk premium that international investors apply to emerging market assets. Third, they help contain inflation by limiting the pass-through effect of a depreciating currency on the prices of imported goods.

The structural limitations

Maintaining a peg is not cost-free. The central bank must hold substantial foreign currency reserves to defend the fixed rate whenever market pressure pushes against it. If the country runs persistent trade deficits, those reserves drain steadily — and once they are insufficient, a disorderly devaluation becomes almost inevitable.

This structural fragility is why most fixed exchange rate regimes are, ultimately, temporary arrangements. When the economic fundamentals diverge too far from the implied rate, the peg breaks. The collapse of Argentina's currency board in 2001 and Venezuela's bolivar crisis in 2014 are prominent examples of what can happen when a fixed rate is held beyond the point of sustainability.

There is also a policy cost: a country operating under a fixed regime surrenders a significant degree of monetary autonomy. In a downturn, it cannot use exchange rate depreciation as a tool to restore competitiveness or stimulate the economy without undermining the credibility of the peg itself.

What this means for corporate FX risk management

For finance teams at internationally active companies, the distinction between fixed and floating exchange rate regimes matters when mapping FX exposures. Transacting in a pegged currency may feel lower-risk on a day-to-day basis — and often is — but it carries a tail risk: if the peg is adjusted or abandoned suddenly, the resulting move can be far larger and faster than anything seen in a freely floating currency. That risk is rarely zero, and it is rarely priced in until it is too late.

Regardless of the currency regime involved, robust FX risk management requires a clear picture of all currency exposures across the business — at the transaction level, not just the balance sheet — and a systematic approach to hedging them. Automating that process is what allows treasury teams to act consistently, at scale, without relying on manual intervention or market timing.

Related reading

• Learn how to protect your planning rate against adverse FX moves: Protect the Budget Rate
• Discover how layered hedging can reduce long-term cash flow variability across multiple currencies: Reduce Long-Term Cash Flow Variability

Foreign currency revaluation is the accounting process by which a company re-expresses the value of its open foreign currency-denominated receivables and payables in its functional reporting currency, using the exchange rate prevailing at the end of each accounting period.

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Why it matters

For any business trading across borders, exchange rates rarely stay still between the moment a transaction is booked and the moment it is actually settled. That gap — sometimes days, sometimes months — creates a moving target on the balance sheet. Accounting standards (including IFRS and most local GAAP frameworks) require companies to keep an up-to-date picture of those open positions in their reporting currency. Foreign currency revaluation is the mechanism that makes this possible.

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Without it, a company's financial statements would carry receivables and payables at stale exchange rates, giving management and investors a distorted view of the firm's true financial position.

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How the process works

At the close of each accounting period, the finance team identifies all open monetary items denominated in a foreign currency — typically trade receivables, trade payables, intercompany loans, and bank balances. Each balance is then retranslated using the current spot exchange rate.

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The difference between the rate at which the transaction was originally recorded and the rate used for revaluation generates what is known as an unrealised FX gain or loss. This is "unrealised" precisely because the underlying transaction has not yet been settled — the cash has not changed hands. These unrealised amounts are posted to the profit and loss account (or, in some hedge accounting frameworks, to other comprehensive income).

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Once the transaction is actually settled — the invoice is paid, the loan repaid — the FX difference between the original booking rate and the settlement rate becomes a realised FX gain or loss, which is recorded on the income statement and the balance sheet accordingly.

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The management challenge

Foreign currency revaluation is, in the first instance, an accounting obligation. But for CFOs and treasurers, the numbers it produces carry a deeper strategic message: they are a direct measure of how much unhedged FX exposure is sitting on the books at any point in time.

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Large, recurring unrealised FX losses are often a signal that the company's hedging programme is not adequately covering the full trade cycle — from the moment a commercial commitment is made through to cash settlement. Businesses that hedge only at the payment stage, for example, may still be accumulating significant revaluation risk across their open order book.

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This is where the relationship between revaluation accounting and FX risk management becomes operational, not merely technical.

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Reducing revaluation volatility

One effective way to reduce the impact of foreign currency revaluation on reported earnings is to hedge FX exposures at the transaction level — as early as a firm sales or purchase commitment is confirmed — rather than waiting until a payment is due. This approach, sometimes referred to as micro-hedging, aligns the economic hedge with the accounting exposure, narrowing the gap between booked and settled rates.

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For businesses seeking to eliminate FX gains and losses from the P&L more systematically, Kantox's approach to reducing FX gains and losses covers the full workflow from exposure capture to automated hedge execution.

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Finance teams who also need to ensure their hedges qualify for hedge accounting treatment — and therefore route revaluation differences through other comprehensive income rather than the P&L — can explore how the Kantox Hedge Accounting Module supports audit-ready documentation and effectiveness testing.

Managed Floating Exchange Rate: Definition & How It Works

A managed floating exchange rate — also known as a "dirty float" — is a currency regime in which a central bank actively intervenes in foreign exchange markets to keep its currency within a target range, without committing to a fully fixed peg.

Unlike a pure floating regime, where market forces alone determine a currency's value, and unlike a hard peg, where a rate is locked to another currency by policy mandate, managed floats occupy the middle ground. The central bank monitors the exchange rate continuously and steps in — typically by buying or selling its own currency in the open market — whenever the rate drifts beyond an acceptable corridor. The goal is not to eliminate exchange rate movement, but to prevent extreme swings that could destabilise the economy, harm exporters, or fuel inflation.

How it works in practice

The most prominent modern example is China's renminbi (CNY) regime. Each morning, the People's Bank of China publishes a reference rate — a midpoint — against which the renminbi is permitted to move no more than 2% in either direction during onshore trading that day. This creates a daily band: narrow enough to give the central bank meaningful control, wide enough to allow some market-driven movement.

Other central banks — particularly in emerging market economies — use similar mechanisms, intervening less systematically but still with clear intent to smooth volatility or defend competitive exchange rate levels.

Why it matters for corporate treasurers

For companies with international operations, the regime governing a trading partner's currency has a direct bearing on FX risk management. A managed float introduces a specific kind of complexity: the currency behaves as though it floats, and standard hedging tools can be applied, but central bank intervention can cause abrupt, policy-driven moves that do not follow typical market logic.

This is particularly relevant for businesses exposed to currencies such as CNY, INR, or BRL — currencies that operate under varying degrees of managed float arrangements. In these cases, a treasurer cannot rely solely on market signals when forecasting exchange rate movements. Policy decisions, reserve levels, and the central bank's credibility all feed into the picture.

Understanding the exchange rate regime of each currency in your portfolio is therefore a foundational step before building any FX hedging programme. It informs which instruments are available and liquid, how far in advance exposure can realistically be hedged, and how to interpret rate movements when calibrating your budget rate.

A managed float is neither inherently more nor less risky than a free float — what matters is that your currency risk management approach accounts for the specific dynamics of each regime your business operates in.

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The weighted average exchange rate (WAER) is the blended exchange rate applied to a company's total accumulated FX exposure in a given currency pair, calculated by weighting each individual rate by the size of the underlying transaction or exposure it covers.

Why the WAER matters for FX risk management

When a company builds up foreign currency exposure over time — through a series of sales invoices, purchase orders, or hedging contracts executed at different moments — each element will have been valued at a different market rate. The WAER condenses all of that into a single, meaningful reference rate, giving finance teams a clear view of their blended cost or income in each currency pair.

Without this figure, it is nearly impossible to measure FX performance accurately. Comparing an actual settlement rate against any single historical rate would tell you very little; comparing it against the WAER gives a genuine read on whether the company gained or lost relative to its accumulated position.

How the WAER is calculated

The formula is straightforward: multiply each portion of exposure by its corresponding exchange rate, sum those products, and divide by the total notional exposure. Consider a company whose functional currency is USD, holding two EUR exposures — EUR 100 valued at EUR/USD 1.30, and EUR 200 valued at EUR/USD 1.00. The WAER is:

(100 × 1.30 + 200 × 1.00) ÷ 300 = 1.10

Each time a new piece of exposure is added — say, a fresh sales order or a new hedge tranche — the WAER is recalculated to reflect the updated portfolio. This rolling calculation is maintained separately for each currency pair in which the company operates.

Where the WAER becomes complex in practice

For companies with high transaction volumes — a retailer processing thousands of international orders per month, or an AdTech platform settling campaigns in dozens of currencies — manually tracking and recalculating the WAER is error-prone and practically infeasible. The challenge is compounded when hedging programmes layer multiple forward contracts, each executed at a different rate, on top of the underlying commercial exposure.

This is where automation becomes operationally decisive. Currency Management Automation platforms can calculate the WAER instantaneously across every active currency pair, updating in real time as new transactions are captured. This gives treasury teams an accurate, live picture of their blended rate at any point — without spreadsheets, manual reconciliation, or the latency that creates risk.

The WAER and layered hedging

The WAER is particularly relevant in layered hedging programmes, where exposure is hedged incrementally over time using a series of forward contracts. Because each tranche is executed at the prevailing market rate at the time of hedging, the portfolio naturally accumulates different rates. The WAER of the hedge portfolio can then be compared against the WAER of the underlying commercial exposure to evaluate hedge effectiveness and manage residual risk.

For teams focused on reducing long-term cash flow variability, monitoring the WAER over successive hedging periods provides a disciplined way to smooth out the impact of rate fluctuations without attempting to predict or time the market.

Wm/Reuters Benchmark Rates

Wm/Reuters benchmark rates are standardised spot and forward exchange rates, calculated and published daily at 4:00 pm London time, that serve as a common reference point for pricing, valuation, and settlement across global currency markets.

Why they matter for corporate treasury

For any company with cross-border revenues, costs, or balance sheet exposures, the ability to reference a single, independently calculated rate is genuinely useful. Without a recognised benchmark, comparing FX execution quality across banks, periods, or counterparties becomes an exercise in approximation. Wm/Reuters rates provide that common denominator — they are widely embedded in fund valuations, custodian reports, and intercompany pricing arrangements, making them a practical anchor for treasury teams managing multi-currency operations.

How the rates are calculated

The rates are produced by taking a volume-weighted median of actual trades and order book data captured in a 5-minute window centred on the 4:00 pm London fix (30 seconds either side for major currency pairs). This methodology — governed by the WM Company and distributed through Refinitiv (now LSEG) — was significantly tightened following the 2013–2015 benchmark manipulation scandal, which resulted in substantial fines for several global banks and a wholesale reform of how fixing windows are monitored and audited. Today, the benchmark covers spot rates and forward rates across more than 150 currencies, all quoted using standard ISO 4217 three-letter codes: USD, EUR, GBP, CHF, JPY, BRL, TRY, and so on.

Wm/Reuters vs. ECB reference rates

A closely related benchmark is the euro foreign exchange reference rates published by the European Central Bank, commonly known as ECB reference rates. Published at around 4:00 pm CET each business day, ECB rates are compiled from a different methodology and represent a narrower set of currency pairs — primarily those involving the euro. While Wm/Reuters rates are the more common choice in commercial and investment banking contexts, ECB reference rates are frequently used for regulatory reporting, tax, and accounting purposes within the European Union.

Practical relevance for FX hedging and pricing

The choice of benchmark rate matters most at the point where FX exposure is measured and hedged. Companies using micro-hedging strategies — where each commercial transaction triggers an immediate hedge — typically transact in real time rather than at a daily fix, which gives them tighter control over the rate applied to each individual flow. Conversely, companies that aggregate exposures and hedge periodically may use Wm/Reuters rates as a reference for performance measurement or for setting intercompany transfer prices across subsidiaries. Understanding which benchmark applies — and how it is calculated — is a prerequisite for assessing whether the rates your treasury receives from bank counterparties are competitive.

For companies looking to move beyond manual rate comparisons and build systematic, automated FX workflows, Kantox Dynamic Hedging® provides the infrastructure to execute hedges at rules-based trigger points, removing reliance on daily fixings where that reliance introduces unnecessary timing risk.