Bermuda's treasury division recently increased services in several Pacific Basin, African, Middle East, Indian, Far East, Latin American, Caribbean and Eastern European currencies.

The bank now offers spot, forward and option prices in 71 emerging market currencies as well as services for 25 traditional currencies.

The move targets the bank's mutual and pension fund clients as well as corporate customers already using the bank as custodian.

These clients continue to diversify into emerging markets, Bank of Bermuda sales and marketing manager, treasury, Cynthia Stockum said.

"This has been driven by the client as well as our assessment of where the currency markets have been moving,'' she said.

"Europe is moving toward a single currency. We see the foreign exchange market moving toward the emerging markets. We want to be where the opportunity is. Our custody role has enabled us to be a step ahead (of New York and London institutions).

"In the past, foreign exchange markets focussed on the Organisation for Economic Cooperation and Development (OECD)-developed countries. Now it's the emerging markets. These markets are growing. With growth, you need currency convertibility,'' Ms Stockum said.

To acquire emerging market holdings, clients need to convert to the relevant currency, be it the Malaysia Ringit, the Ghana Cedi, the Bangladesh Taka, the Brazil Real or the Czech Koruna.

Because emerging market currencies can be volatile, clients often hedge currency exposure.

"If you are a corporation with assets or receivables abroad, it behooves you to hedge these exposures,'' she said.

Where regulations and markets allow, the Bank of Bermuda offers foreign exchange forwards.

A forward is a purchase or sale of a specific quantity of a commodity, government security, foreign currency or other financial instrument at the current, or spot, price with delivery and settlement at a specified future date.

"If the Thai Baht collapses, you're investment doesn't collapse because the currency has been sold forward,'' Ms Stockum said.

Where forward markets are not active, or government restrictions have prevented establishing normal forward trading, the bank offers non-deliverable forward contracts as an alternative hedge.

The non-deliverable forward is a fairly specialised product offered by many banks internationally. It is a "synthetic instrument'' with no exchange of currencies at maturity. Synthetic, because rather than settle in the appropriate currency, the contract is settled in US dollars. Only the net US dollar difference between the forward contract rate and the spot rate at maturity is exchanged.

This hedge can also be used to take foreign currency position.

Foreign exchange is part of the bank's treasury services -- the other is short term interest rate section handling products like commercial paper and certificates of deposit. In all, treasury employs 52 staff, among them five market makers on the foreign exchange side.