aud now 89.85 us cents!, page-6

Hi axlsusie

It’s the forward rate they will use to close out the hedges, not the spot rate

Having said that, an increase in the spot rate will obviously have a favourable impact on the forward rate.

Under international accounting standards, the SPOT RATE and not FORWARD RATE must be used in financials.

All equity hedges are now in the money using the spot rate but would not necessarily be closed off as yet.

JP Morgan in their report estimated there was a 4c lag between the forward rate and spot rate. I don’t personally know what the lag exactly is but assuming there is a 4c lag, then approximately 60% of the hedges would now be closed off as the forward rate would be around 86.

The previous fund manager there advised me that the equity hedges were 80 – 90 using the spot rate

Im assuming now that all hedges from 80 to 86 have now been closed off.

Yes NTA will be affected quite favourably by this.

The cross currency swaps would also be further in the money as the weighted avg hedge rate was 75 according to the presentation. If these get closed out, CER would realise a nice profit as a result.

Cheers