---
title: "Exchange rate volatility in emerging countries: how to manage risks? – Hedgepoint Global Markets"
description: Exchange rate volatility is one of the main challenges for those who operate or invest in emerging countries. This phenomenon, caused by abrupt variations
image: https://hedgepointglobal.com/hubfs/Imported_Blog_Media/Featured-Image-29-1.png
---

![LOGO 2](https://hedgepointglobal.com/hubfs/LOGO%202.png "LOGO 2")

# Exchange rate volatility in emerging countries: how to manage risks?

Exchange rate volatility is one of the main challenges for those who operate or invest in emerging countries. This phenomenon, caused by abrupt variations

**Hedgepoint Global Markets**  
Jun 9, 2025 12:00:00 AM

![](https://hedgepointglobal.com/hubfs/Imported_Blog_Media/Featured-Image-29-1.png)

Exchange rate volatility is one of the main challenges for those who operate or invest in emerging countries. This phenomenon, caused by abrupt variations in exchange rates, directly affects costs, revenues, cash flow and even the competitiveness of companies operating internationally. 

In this article, we’ll explore: 

- The main causes of high volatility in emerging countries;
- How this risk impacts companies and investors;
- What tools exist to manage exchange rate risks;
- And what recent lessons the market has brought us. 

Happy reading! 

## What makes volatility more intense in emerging countries? 

In emerging markets, there is a combination of structural and cyclical factors that increase exchange rate risk. Issues such as dependence on commodities, fiscal and trade deficits, as well as political instability, are constant in these countries. 

Another aggravating factor is the lower liquidity of local markets. In other words, any inflow or outflow of capital, even if relatively small, can generate sudden movements in exchange rates.  

The South African rand (ZAR), for example, often suffers sharp devaluations at times of global tension. This happens even if local fundamentals remain stable. 

In addition, emerging countries tend to have lower international reserves and higher external debts. This combination reduces the ability of central banks to intervene in times of stress.  

An emblematic case is that of Egypt. In 2023 and 2024, the country faced a sharp devaluation after losing more than 40% of the value of its currency due to a shortage of dollars and high foreign debt. 

Among the external factors, US monetary policy has a huge influence on emerging countries. When the Federal Reserve (Fed) raises interest rates, American assets become more attractive, stimulating capital outflows from these markets. 

This movement puts direct pressure on local currencies, which tend to depreciate rapidly. This is exactly what happened in 2022, when the Brazilian real lost strength, even with commodity prices at high levels. 

Another relevant factor is geopolitical tensions, such as the trade dispute between the United States and China. In addition, events such as elections in major powers often cause uncertainty in the markets. 

Read also: 

- **Understand the influence of the **[**Federal Reserve (FED) **](https://hedgepointglobal.com/blog/federal-reserve-and-the-brazilian-economy/?hsLang=en)**on the Brazilian economy** 

## What are the impacts of exchange rate volatility for companies and investors? 

Volatility is not just a theoretical concept: it actually has a direct impact on companies’ operations. Without proper risk management, exchange rate variations can erode margins, generate additional costs and affect cash flow. 

For companies that depend on foreign currencies, this translates into significant challenges. The lack of exchange rate predictability hinders not only long-term planning, but also day-to-day operational decisions. 

In addition, the perception of country risk has a direct impact on the confidence of foreign investors. When there is no efficient risk control, the cost of raising funds rises, as does the difficulty of accessing international credit lines. 

In practice, there are two main types of risk for companies operating in emerging countries: 

- **Direct risk:** when revenues, costs or debts are exposed in foreign currencies.
- **Indirect risk:** this occurs when exchange rate variations influence macroeconomic variables such as inflation, domestic demand and access to credit. 

Read also: 

- [**Risk management **](https://hedgepointglobal.com/blog/risk-management-in-commodities-how-does-it-work/?hsLang=en)**in commodities: how does it work?** 

## Tools for managing exchange rate risks: what can companies do? 

Managing exchange rate risks is essential for any company exposed to international markets, and this applies to large corporations as well as small and medium-sized ones. 

The first step is to understand how the company’s operating cycle connects with its foreign exchange exposure. Based on this diagnosis, it becomes possible to adopt a formal risk management policy that aligns with the objectives and needs of the operation. 

### Exchange rate protection in emerging countries 

The main tools include: 

- **Forward contracts:** allow an exchange rate to be fixed for a future date, bringing predictability to specific transactions;
- **Currency swaps:** used to exchange cash flows between different currencies, they are often used in long-term financing. For example, a cooperative that has borrowed in dollars can use a swap to “convert” this liability into reais, reducing its exchange rate exposure;
- **NDFs (Non Deliverable Forwards):** contracts widely used for currencies in illiquid or non-convertible markets, such as the Argentine peso or the Nigerian naira. In this case, the company can contract an NDF to hedge against the volatility of the Colombian peso without the need to carry out a physical transaction in the currency;
- **Currency options:** which offer the right, but not the obligation, to buy or sell currency at a pre-established rate;
- **Automated solutions such as AutoFX:** which help reduce operational errors and speed up the processing of operations; 

### Complementary risk mitigation strategies 

In addition to financial instruments, geographical and currency diversification has emerged as an important practice. This strategy allows companies to be less exposed to the fluctuations of a single economy or currency. 

It’s also worth noting that there are already more accessible alternatives for smaller companies. Brokers and specialized fintechs offer contracts with reduced minimum values and, in some cases, make hedging possible through consortia between companies in the same sector.  

Another approach is to look for a so-called natural hedge, which consists of balancing income and expenses in the same currency. For example, an exporter can dollarize part of its operating costs, reducing its dependence on the local currency. 

Read also:  

- [**Hedging**](https://hedgepointglobal.com/blog/hedge-for-farmers-protect-your-operation/?hsLang=en)**: an essential strategy to protect farmers from volatility** 

## What have we learned from recent crises? 

The currency crises that have affected countries like Nigeria, Egypt and Argentina in recent years have taught us important lessons. One of them is that risk management should not only be triggered when the exchange rate has already skyrocketed. 

Companies that maintain an active currency hedging policy, even in times of lower volatility, manage to preserve their financial health. What’s more, they increase their competitiveness in foreign markets. 

On the other hand, common mistakes are still observed in the market, such as: 

- Treating currency protection as a cost and not as a tool for financial resilience;
- Hiring complex instruments without a full understanding of the risks involved;
- Hedge only part of the exposure, leaving the operation vulnerable. 

Read also: 

- [**Exchange rate policy**](https://hedgepointglobal.com/blog/exchange-rate-policy-and-its-impact-on-commodities/?hsLang=en)**: what is it and what impact does it have on the commodities market?** 

## Ready to manage your risks in emerging countries? 

Understanding the risks of exchange rate volatility and, above all, knowing how to mitigate them is essential for companies’ financial health and competitiveness. A good hedging strategy allows managers to plan and make safer, more predictable decisions. 

And if quality information makes all the difference in this process, [**Hedgepoint HUB **](https://auth0.hedgepointhub.com/login?state=hKFo2SBPUDM4WC1ieHR2S0pnRmZ6dXNzQlBjVHlmaEN1UFhSdqFupWxvZ2luo3RpZNkgOUFtMG9sQWdMT0p2dmJONDdlT0REekZ1ZXdrdWFWWUyjY2lk2SBQSHFXbFIwRW84dVNCcTJnSTBSaHRwU1REWUxlVGc5Vw&client=PHqWlR0Eo8uSBq2gI0RhtpSTDYLeTg9W&protocol=oauth2&scope=openid%20profile%20email%20offline_access&audience=cp2-api-production&redirect_uri=https%3A%2F%2Fportal.hedgepointhub.com&connection=CP2-Production&response_type=code&response_mode=query&nonce=WGFSZ29lZTZPNC41bzdNTG1sNXFlQ2dXZ0dFXzY3aTFZUE5sRFp1LjR6aA%3D%3D&code_challenge=-fOWLUyNll1WzvnWEV49z-gWcxWa41H7FmrVi1tZHJA&code_challenge_method=S256&auth0Client=eyJuYW1lIjoiQGF1dGgwL2F1dGgwLWFuZ3VsYXIiLCJ2ZXJzaW9uIjoiMi4yLjMiLCJlbnYiOnsiYW5ndWxhci9jb3JlIjoiMTQuMi4xMiJ9fQ%3D%3D)is your greatest ally. Our platform brings together in-depth analysis, up-to-date data, economic scenarios, commodity insights and much more. Turn knowledge into competitive advantage**!** 

Read also: 

- [**Hedgepoint Market Calls**](https://hedgepointglobal.com/blog/hedgepoint-market-calls-analysis-and-strategies-for-commodities/?hsLang=en)**: strategic information for intelligent decisions** 

——————————————————————————————————————

## Similar Blog Posts

[![El Niño May Reduce Global Wheat and Palm Oil Supply and Increase Market Volatility](https://hedgepointglobal.com/hubfs/32-2.png)

### El Niño May Reduce Global Wheat and Palm Oil Supply and Increase Market Volatility

El Niño is once again on the radar of global agricultural markets. Although it is a recurring climate phenomenon, its impacts vary depending on it...

](https://hedgepointglobal.com/en/blog/el-ni%C3%B1o-may-reduce-global-wheat-and-palm-oil-supply-and-increase-market-volatility?hsLang=en)

[![El Niño Reinforces Climate Uncertainty for Global Cocoa Production](https://hedgepointglobal.com/hubfs/28-1.png)

### El Niño Reinforces Climate Uncertainty for Global Cocoa Production

El Niño is once again on the radar of global agricultural markets. Although it is a recurring climate phenomenon, its impacts vary depending on it...

](https://hedgepointglobal.com/en/blog/el-ni%C3%B1o-reinforces-climate-uncertainty-for-global-cocoa-production?hsLang=en)

[![El Niño Enters the Radar of the Coffee Market and May Affect Key Producing Origins in the Coming Cycles](https://hedgepointglobal.com/hubfs/27-1.png)

### El Niño Enters the Radar of the Coffee Market and May Affect Key Producing Origins in the Coming Cycles

El Niño is once again on the radar of global agricultural markets. Although it is a recurring climate phenomenon, its impacts vary depending on it...

](https://hedgepointglobal.com/en/blog/el-ni%C3%B1o-enters-the-radar-of-the-coffee-market-and-may-affect-key-producing-origins-in-the-coming-cycles?hsLang=en)

![LOGO 2](https://hedgepointglobal.com/hubfs/LOGO%202.png "LOGO 2")

Rua Funchal, 418, 18º andar - Vila Olímpia São Paulo, SP, Brasil

Contato

(00) 99999-8888           [example@mail.com](mailto:example@mail.com)

[![linkedin-1](https://hedgepointglobal.com/hs-fs/hubfs/linkedin-1.png?width=20&height=20&name=linkedin-1.png)](https://www.facebook.com)    ![youtube](https://hedgepointglobal.com/hs-fs/hubfs/youtube.png?width=20&height=14&name=youtube.png)

 

Section

Home

O que Fazemos

Mercado

Quem Somos

HUB

Blog

 Confira nossos termos gerais e avisos importantes

*Esta página foi preparada pela Hedgepoint Schweiz AG e suas afiliadas (“Hedgepoint”) exclusivamente para fins informativos e instrutivos, sem o objetivo de estabelecer obrigações ou compromissos com terceiros, nem de promover uma oferta ou solicitação de oferta de venda ou compra de quaisquer valores mobiliários, commodity interests ou produtos de investimento.*

*A Hedgepoint e suas associadas renunciam expressamente a qualquer uso das informações contidas neste documento que direta ou indiretamente resulte em danos ou prejuízos de qualquer natureza. As informações são obtidas de fontes que acreditamos serem confiáveis, mas não garantimos a atualidade ou precisão dessas informações.*  
*O trading de commodity interests, como futuros, opções e swaps, envolve um risco substancial de perda e pode não ser adequado para todos os investidores. Você deve considerar cuidadosamente se esse tipo de negociação é adequado para você, levando em conta sua situação financeira. O desempenho passado não é necessariamente indicativo de resultados futuros. Os clientes devem confiar em seu próprio julgamento independente e/ou consultores antes de realizar qualquer transação.*  
*A Hedgepoint não fornece consultoria jurídica, tributária ou contábil, sendo de sua responsabilidade buscar essas orientações separadamente.*

*A Hedgepoint Schweiz AG está organizada, constituída e existente sob as leis da Suíça, é afiliada à ARIF, a Associação Romande des Intermédiaires Financiers, que é uma Organização de Autorregulação autorizada pela FINMA. A Hedgepoint Commodities LLC está organizada, constituída e existente sob as leis dos Estados Unidos, sendo autorizada e regulada pela Commodity Futures Trading Commission (CFTC) e é membro da National Futures Association (NFA), atuando como Introducing Broker e Commodity Trading Advisor. A Hedgepoint Global Markets Limited é regulada pela Dubai Financial Services Authority. O conteúdo é direcionado a Clientes Profissionais e não a Clientes de Varejo. A Hedgepoint Global Markets PTE. Ltd está organizada, constituída e existente sob as leis de Singapura, isenta de obter uma licença de serviços financeiros conforme o Segundo Anexo do Securities and Futures (Licensing and Conduct of Business) Act, pela Monetary Authority of Singapore (MAS). A Hedgepoint Global Markets DTVM Ltda. é autorizada e regulada no Brasil pelo Banco Central do Brasil (BCB) e pela Comissão de Valores Mobiliários (CVM). A Hedgepoint Serviços Ltda. está organizada, constituída e existente sob as leis do Brasil. A Hedgepoint Global Markets S.A. está organizada, constituída e existente sob as leis do Uruguai.*

*Em caso de dúvidas não resolvidas no primeiro contato com o atendimento ao cliente (client.services@hedgepointglobal.com), entre em contato com o canal de ouvidoria interna (ombudsman@hedgepointglobal.com – global ou ouvidoria@hedgepointglobal.com – apenas Brasil) ou ligue para 0800-8788408 (apenas Brasil).*  
*Integridade, ética e transparência são valores que guiam nossa cultura. Para fortalecer ainda mais nossas práticas, a Hedgepoint possui um canal de denúncias para colaboradores e terceiros via e-mail ethicline@hedgepointglobal.com ou pelo formulário Ethic Line – Hedgepoint Global Markets.*

*Nota de segurança: Todos os contatos com clientes e parceiros são realizados exclusivamente por meio do nosso domínio @hedgepointglobal.com. Não aceite informações, boletos, extratos ou solicitações de outros domínios e preste atenção especial a variações em letras ou grafias, pois podem indicar uma situação fraudulenta.*  
*“Hedgepoint” e o logotipo “Hedgepoint” são marcas de uso exclusivo da Hedgepoint e/ou de suas afiliadas. O uso ou reprodução é proibido, a menos que expressamente autorizado pela HedgePoint.*

*Além disso, o uso de outras marcas neste documento foi autorizado apenas para fins de identificação. Isso, portanto, não implica quaisquer direitos da HedgePoint sobre essas marcas ou implica endosso, associação ou aprovação pelos proprietários dessas marcas com a Hedgepoint ou suas afiliadas.*

*aA Hedgepoint Global Markets é correspondente cambial do Ebury Banco de Câmbio, de acordo com a resolução CMN Nº 4.935, DE 29 DE JULHO DE 2021, Artigo 14 do Banco Central do Brasil (BACEN).*

*Para mais informações sobre nosso parceiro, serviços disponíveis, atendimento e ouvidoria, acesse o link a seguir: https://br.ebury.com/*

```json
{
  "@context" : "https://schema.org",
  "@type" : "BlogPosting",
  "author" : {
    "@type" : "Person",
    "name" : "Hedgepoint Global Markets",
    "url" : "https://hedgepointglobal.com/en/blog/author/hedgepoint-global-markets"
  },
  "dateModified" : "2025-06-16T12:39:16.006Z",
  "datePublished" : "2025-06-09T03:00:00.000Z",
  "headline" : "Exchange rate volatility in emerging countries: how to manage risks? – Hedgepoint Global Markets",
  "image" : [ "https://hedgepointglobal.com/hubfs/Imported_Blog_Media/Featured-Image-29-1.png" ],
  "mainEntityOfPage" : {
    "@id" : "https://hedgepointglobal.com/en/blog/exchange-rate-volatility-and-risk-management-in-emerging-countries",
    "@type" : "WebPage"
  },
  "publisher" : {
    "@type" : "Organization",
    "logo" : {
      "@type" : "ImageObject",
      "url" : "https://hedgepointglobal.com/hubfs/Hedgepoint-logo-square-2-1.png"
    },
    "name" : "Hedgepoint Global Markets"
  }
}
```