As we enter an era of elevated currency volatility, corporate treasurers are under pressure to protect bottom lines from swings and dips in the currency market by adapting their hedging strategies. In this article, Eric Huttman, CEO of MillTech, outlines the global trends in corporate FX hedging strategies illustrated through data from the company’s recent Global FX Report 2025.
Currency volatility is back as huge geopolitical moves unfold on the global stage, and it means business. The recent market sell-off, for example, sent many key global currencies plummeting and caused dollar demand to surge.
This is a huge risk for corporate treasurers and CFOs, since their organizations’ profits are at the mercy of currency market fluctuations. Businesses’ hedging strategies can make or break bottom lines in times of such high volatility.
A strong hedging strategy works to protect the company from the worst of market uncertainty. However, a poor strategy can allow FX rates to silently eat away at profits.
With currency volatility looking like it’s here to stay, more corporates are now hedging their FX risk and updating their hedging strategies, especially as domestic currencies have a particularly strong impact and the cost of hedging bites.
Hedging currency risk is no longer seen as a ‘nice to have’ but is an essential for protecting companies’ bottom lines. The vast majority of corporates now actively hedge their FX risk – an average of 81% across Europe, the UK and North America.
This trend is especially pronounced in North America (82%) and Europe (86%), where rate differentials and dollar strength have created persistent volatility, making it more important for them to protect their risk.
Of those that do not hedge, over half (52%) globally said they were now considering hedging due to market conditions. The UK had the highest percentage of corporates considering hedging (68%), while this figure dropped to 36% among European corporates.
This strengthened focus on hedging FX risk demonstrates how companies are approaching an increasingly volatile currency market. The US dollar index has dropped by over 8% since the start of the year, for example. Rising geopolitical tensions have a direct impact on currency values, and companies dealing in multiple global currencies must take action to protect themselves from swings and dips in the market. This makes FX hedging a critical part of any company’s risk management strategy, shielding their revenues from losses incurred through currency volatility.
As geopolitical tension doesn’t appear to be going anywhere, we expect hedging rates among corporates to continue rising.
FX hedging strategies across the globe are also evolving in line with each other as the world experiences higher levels of currency volatility as a whole.
The average hedge ratio was 48%, and there was little divergence across regions. North America and Europe both had hedge ratios of 49%, whereas UK corporates were slightly lower at 45%.
Hedging lengths also showed relatively low variation between regions, with an average of 5.3 months. Hedging lengths were the longest in the UK (5.5 months). By comparison, corporates’ hedging lengths were 5.39 months in Europe and 5.05 months in North America.
These synchronized FX hedging strategies are not surprising. Longer hedge tenors and higher hedge ratios are reflective of corporates’ struggle for stability over what has so far been a volatile year in currency markets. By increasing hedge ratios and extending hedge lengths, corporates can protect more of their FX risk for a longer period of time by locking in preferred FX rates. This gives companies the option to trade at better rates over a greater timespan should the market take a downturn. As a result, they won’t incur unnecessary losses on FX transactions, helping them to ride out periods of currency volatility and increasing the cost-effectiveness of their businesses.
The low variation witnessed in hedging strategies shows that corporates are behaving similarly and adopting consistent risk management practices as they tackle the same global uncertainty together.
Businesses’ hedging strategies are also heavily dependent on the performance of their home currencies. This arguably had the greatest impact, with 88% of corporates globally stating that their home currencies affected their bottom lines.
North American firms were the most affected, with 93% affected by the strong dollar. 91% of North American corporates also said that the stronger dollar had positively impacted their competitive position in international markets, while 92% said they expect it to continue to strengthen.
A stronger U.S. dollar benefits local importers by lowering costs for businesses reliant on foreign goods, such as retailers, electronics firms, and manufacturers sourcing materials abroad. Sectors like automotive and pharmaceuticals may also gain from cheaper imports, though exporters face challenges as U.S. goods become less competitive globally.
Newly imposed tariffs from both the Trump administration and worldwide retaliatory levies have thrown the markets into disarray. The broad USD-weakness seen in the immediate aftermath of the tariffs saga suggests the initial impact will initially be felt closer to home, hiking the cost of importing from other economies, before the effects take hold elsewhere. However, on the flip side, importing from the US has now been made cheaper for European companies.
As the world enters a new era defined by a weaker dollar, companies must analyze what this means for their home currencies and adjust their hedging strategies accordingly. Trade tariffs from the world’s leading superpower tend to weaken other economies. In the long term, this could cause their currencies to decline against the dollar, thereby making it more expensive to do business with the US while making it cheaper for local American companies. If more currency volatility is expected in the market, then corporates may want to consider protecting themselves by increasing hedging activity.
The surge in corporate FX hedging costs across all regions is another key trend for businesses, with four in five corporates globally experiencing rising hedging costs in the last year.
This rise was most felt in Europe, where 98% of respondents said that costs had risen. Businesses in the UK and North America were less likely to be impacted by rising hedging costs, but those suffering were still in the significant majority, with 70% and 73% respectively saying that costs had risen.
Costs were also among CFOs’ top priorities, particularly when it comes to cost transparency and minimizing costs more broadly. The UK had the highest proportion of respondents reporting that these were key priorities, closely followed by Europe and North America.
Higher hedging costs demand a more proactive and considered approach from treasury teams, given that hedging decisions now carry more weight. CFOs must carefully assess their exposures, determine their hedging capacity, and be sure to choose the right financial instruments. Most importantly, they must strike a delicate balance between the rising costs of hedging and the potential risks of leaving exposures unprotected.
It’s now or never for corporate treasurers and CFOs. As turbulent geopolitical conditions cause currency volatility to spike, the FX hedging landscape is undergoing immense change. Corporates have a crucial choice to make here: they can either adapt with the market, adjusting their hedging lengths and ratios to suit times of greater uncertainty, or remain exposed to global currency movements.
Under this climate, businesses must take the time to carefully assess the situation and adjust how they hedge. Adapting hedging strategies successfully will enable corporates to lock in more favorable rates for longer, shielding them from any drastic dips in the currency market.
*This article examines the data and results of surveys by Censuswide on MillTech’s behalf conducted in August 2023, June 2024 and September 2024 based on surveys of 252 (2023) and 250 (2024) UK senior finance decision-makers and 258 North American senior finance decision-makers at mid-sized asset management firms in the UK and North America (described as those with assets under management ranging from (£500m to £20b UK 2023), ($500m to $20b North America) and (£40m – £16b AUM/$50m to $20b AUM UK 2024).
The European research was conducted between 12 December and 16 January 2025 based on surveys of 250 CFO’s, treasurers and senior finance decision-makers in mid-sized corporates (described as those who have a market cap of €46 Million up to €919.39 Million total market cap) and 252 CFO’s, treasurers and senior finance decision-makers at mid-size asset management firms described as those with assets under management ranging from €46 Million – €20 Billion +) across Belgium, Denmark, France, Germany, Luxembourg, Netherlands, Sweden and Switzerland.
MillTech is the trading name of Millennium Global Treasury Services Limited (MGTS) and MillTechFX Americas Inc. MGTS is authorized and regulated by the Financial Conduct Authority (FRN 911636) and is a company registered in England and Wales with company number 11790384. The registered address is 88 Wood Street, London, EC2V 7QR, United Kingdom.
MillTechFX Americas Inc is registered with the National Futures Association as a Commodity Trading Advisor (NFA ID: 0545635).
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The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations. You should consult your investment, tax, legal, accounting or other advisors.
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*Group Hedged assets as of 31 January 2025 and is a combination of USD 15.7 billion hedged assets (all strategies that include hedging, up to the maximum amount that can be hedged) managed by Millennium Global Investments Limited and USD 12.6 billion managed by MillTech. Millennium Group comprises Millennium Global Investments Limited and Millennium Global Treasury Services Limited.