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The AGANIM LTD is a Ghanaian exporter that involves its exports to South African in South...

The AGANIM LTD is a Ghanaian exporter that involves its exports to South African in South African Rand. if it expects that Rand will appreciate against the Ghana cedis in the future, should it hedge its exports with forward contract? Explain

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No Aganim Ltd should not hedge its exports with forward contract because any appreciation in Rand will provide benefits to the Exporter because exporter currency (Ghana cedis) would be depreciation against Rand and this will provide benefits to the exporter as he will get more home currency due to depreciation of home currency and appreciation of foreign currency. For example Exchange rate between Ghana Cedis and Rand is 1 Ghana cedis equal to 10 Rand and total value of export in Rand is 10000 and it is expected that Rand would appreciate and new exchange rate would be R Ghana cedis equals to 8 Rand. So exporter before the change in exchange rate would get (10000/10) 1000 Ghana Cedis but after change in exchange rate, he would get (10000/8) = 1250 Ghana Cedis so this would be beneficial to the exporter.

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