Published by Global Banking and Finance Review
Posted on March 28, 2025
By Amanda Cooper
GDANSK (Reuters) -Two out of three companies around the world are planning to change their currency hedges by adding to them, or keeping them for longer in response to growing geopolitical tensions, a survey on Friday from software provider MillTechFX showed.
Companies and investors alike use combinations of derivatives to protect themselves against high volatility in the currency markets that has the potential to juice up their returns or their bottom lines, but can also wreak havoc.
In its first global 2025 survey on FX hedging, MillTechFX surveyed 750 senior corporate finance officers in Europe, the United States and the United Kingdom.
U.S. President Donald Trump's return to the White House this year has whipped up market volatility, as investors and companies struggle to respond to his erratic roll-out of tariffs and trade policy, as well as his unconventional approach to foreign relations, specifically towards Europe.
62% of respondents to MillTechFX's survey said they planned to adjust their strategies this year, with increasing the length of their hedges or the proportion of currency exposure that they hedge this year.
The most popular move has been to increase hedge length, with 62% saying they would do so. A majority currently hedge out to between four and six months, according to the survey.
"Currency volatility remains a defining theme in 2025, driven by tariffs, geopolitical tensions, and shifting economic policies," Nick Wood, head of execution at MillTechFX said.
"The strengthening dollar reflects inflationary expectations and U.S. political divergence, while trade disputes and global conflicts continue to reshape capital flows," he said.
MillTechFX said 81% of companies hedge their currency exposure, but three quarters of those that don't said they had experienced losses.
U.S. corporates experienced the most losses from unhedged currency risk, with 77% affected, followed by the UK at 75% and Europe at 72%, the survey showed.
Part of the problem is the rising cost of hedging currency exposure, with 50% of respondents that do not hedge choose not to do so because it is too expensive, the survey said.
That said, the survey showed 52% of those companies that have not hedged previously are now considering doing so.
Last year, sterling held up the against the dollar compared with other major currencies, losing just 1.7% in value. Japan's yen lost over 10%, while the euro lost 6%.
According to the survey, 42% of UK corporates were hit negatively by the stronger pound, while only 28% of European corporates were negatively affected by euro volatility.
91% of North American corporates said the
stronger dollar had positively impacted their competitive
position in international markets.
(Reporting by Amanda Cooper; Editing by Kim Coghill)
