Corporates Increasing FX Hedging – Survey

Corporates are responding to tariff-driven volatility by increasing, albeit slightly, their FX hedging ratios and lengths, according to the latest survey from MillTechFX, which polled its regular 250 executives at US and UK corporates.

The survey, taken in April 2025, finds, unsurprisingly, that 100% of respondents have been impacted by the volatility to hit FX markets this year, although only 23% negatively. Within this, however, 52% of US corporates have been hit negatively, while 85% of UK firms saw a positive impact – clearly a reflection of the rise in Cable over the past few months, sterling is up close to 10% year-to-date on the dollar.

UK hedge lengths (6.57 months) are the longest they have been in a year, suggesting they’re locking in rates for longer, possibly because they’re more favourable, while US hedge lengths (5.84 months) and ratios (39%) are the lowest they have been since MillTechFX started tracking them last year. MillTechFX suggests this could be to build flexibility into corporate hedging programmes.

“2025 got off to a frantic start with market uncertainty, driven by tariffs, creating volatility in the FX market and headaches for corporate CFOs in the first quarter,” observes Michael Huttmann, CEO of MillTechFX. “​The US dollar experienced its steepest early-year decline since 1989, with the Dollar Index dropping 8.4% due to aggressive trade policies, economic contraction and investor concerns over potential US withdrawal from the IMF.

“Despite all this movement, corporates’ hedge ratios remained the same from the last quarter, coming in at 52% and hedge lengths rose slightly from 6.5 months to 6.6 months,” he continues. “However, when you take a closer look, there is notable geographical divergence. US corporates’ hedge lengths and hedge ratios are the lowest since we started tracking them a year ago, which means they’re protecting less of their exposure and for shorter periods, perhaps to build flexibility into their hedging programmes. Meanwhile, UK corporates’ hedge lengths are the longest they have been since last year, suggesting they’re locking in rates for longer, possibly because they’re more favourable for the pound due to the weaker dollar.

“It’s clear this volatility was top of mind for CFOs” Huttmann suggests. “Volatility was the most significant external factor influencing FX hedging decisions (24%) in Q1 2025. This tariff-driven volatility created challenges for corporates and many doubled down on hedging to protect their bottom lines. Over half (54%) extended their hedge lengths while over two-fifths (43%) increased their hedge ratio as a direct result. Both are defensive manoeuvres designed to lock in more certainty for longer. Surprisingly, geopolitics was the second smallest external factor affecting corporates’ FX hedging in Q1.

“Looking ahead, we can expect more hedging activity as tariffs continue to bite,” he concludes. “In recent weeks, several of our clients pushed their hedges out to the maximum available tenor as they looked to lock in protection and ride out near-term instability. This makes sense, given that extending hedges maintains the same level of protection against currency movements but without the need to book in profit and loss generated by short-term FX swings. Those without hedging programmes will likely have suffered from recent volatility and should consider implementing a risk management programme to protect their bottom line, but they need to ensure they don’t lock in rates at the wrong time and suffer more losses.”