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Member question: “When do you set your monthly accounting FX rates? Our fiscal month always ends on Friday, end of day. We set our month-end rates on Thursday at 5 p.m. EST. Alternatives include:
- “Setting FX rates on Friday morning, but intraday historical data is limited in time, which limits auditability.
- “Setting FX rates on Friday at 5 p.m. EST, which means that we would trade very close to the weekend, which is a risk.”
Peer answer 1: “We set rates monthly, 8 a.m. [three days before month-end]. We like to trade soon after setting rates. We used to set at 7:30 a.m., but that pushed us to trade during a less liquid market.
- “I think the only downfall to 8 a.m. is that we sometimes get some odd results in Latin American markets that are just opening. So I would probably go for 8:30 a.m. if I could.
- We take a snapshot in Excel at that time and save it; plus, there is a documented check by the controller’s team that provides the audit evidence.
- They compare rates in the system to their own snapshot for reasonableness.”
Peer answer 2: “What rate source are you using? Have you considered using 4 p.m. London? It is the EOD rate for WM/Reuters fix.”
Member response: “Thank you for the suggestion. You reminded me that I could use the last price at another time—for example, by picking London fix.”