Firms expand currency hedging as global volatility rises

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By: Dakir Madiha

Firms expand currency hedging as global volatility rises

Nearly nine in ten medium-sized companies across North America and Europe are now protecting themselves against foreign exchange swings, as prolonged market turbulence and policy uncertainty drive a structural shift in corporate treasury strategies. The 2026 MillTech Global FX Report found that 88 percent of surveyed firms hedge currency exposure, up from 81 percent a year earlier. Many are also extending their contracts, with the average hedge horizon increasing to 5.5 months.

The trend is driven by the weakening of the U.S. dollar, which lost more than nine percent on a trade-weighted basis in 2025, marking its steepest annual decline since 2017. The dollar’s drop, fueled by Federal Reserve rate cuts and shifting trade policies, has left many companies vulnerable to exchange-rate losses. MillTech’s fourth-quarter 2025 monitor reported that 80 percent of firms suffered financial setbacks from unhedged exposures last year. Businesses in the United Kingdom lost an average of £6.7 million, while counterparts in the United States saw average losses nearing $10 million.

Although hedging has become more expensive costs rose by an average of 67 percent companies remain committed. Only four percent reported stable expenses, while over half faced cost increases of up to 100 percent. Still, fewer firms now cite cost as a reason to avoid hedging, dropping from 51 to 26 percent. Instead, most point to complex internal systems as the main barrier.

According to MillTech’s CEO, Eric Huttman, this evolution signals a lasting change in corporate risk behavior. He noted that firms are adapting to persistent uncertainty by extending tenors and maintaining balanced hedge ratios to secure predictability without losing flexibility. Among investment managers, 87 percent now hedge predictable currency exposure, and nearly half plan to raise their hedge ratios. Huttman described the current landscape as “a preview of the new normal,” indicating that aggressive FX risk management is becoming a permanent feature of global business finance.