US and UK companies reduced their foreign-exchange hedge ratios to 46% in the April-to-June period, a private survey found, suggesting treasurers are becoming less defensive just as markets await clearer policy direction from central banks.
US and UK companies cut FX hedge ratios to 46%
The drop from 57% in the prior quarter matters because it leaves exporters, importers and multinational balance sheets more exposed if currency swings pick up again. Lower hedging can improve flexibility and reduce costs when volatility is fading, but it also narrows the cushion against an abrupt move in interest-rate differentials, which still drive much of the foreign-exchange market.
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The survey by currency-trading software provider Miltech, covering 285 finance chiefs in the US and UK, also found the average hedge tenor shortened to 5.7 months from 6.62 months. Nearly half the companies surveyed were hedging only 26% to 50% of assets and liabilities exposed to exchange-rate risk, while the share hedging 51% to 75% fell to 34% from 54%.
That retrenchment comes after FX volatility rose in the January-to-March quarter as the US-Iran conflict escalated, before easing in the second quarter, according to LSEG data cited in the report. In practice, the move reflects a tactical recalibration: corporate treasurers appear less willing to lock in protection for longer periods when spot conditions are calmer, but they are doing so without a strong conviction that policy or geopolitics have stabilized.
Miltech said shorter hedge horizons and lower ratios can preserve flexibility while firms wait for clearer policy signals. The trade-off is that companies become more vulnerable if rate paths diverge or volatility returns, a risk that is especially relevant for UK firms, where monetary policy was cited as the biggest driver of hedging decisions, and for US firms, where market volatility ranked highest.
For investors, the signal is not just about foreign-exchange management but about earnings sensitivity. Lower hedge coverage can make future results more volatile for multinational groups, potentially amplifying translation losses or gains depending on currency moves. It also means that sudden FX swings could have a bigger impact on margins, guidance and capital allocation decisions in the quarters ahead.
The broader narrative is that corporate finance teams are easing back on protection because the near-term cost of hedging no longer looks as urgent as it did during the latest volatility spike. But that bet leaves them more exposed to any renewed shock from central-bank policy, geopolitical stress or a sharper break in exchange rates — and that is where the next market test may come.
| Entity | Gains | Losses |
|---|---|---|
| US and UK corporates | ▲Lower hedge costs | ▼More FX exposure |
| Treasurers | ▲Greater flexibility | ▼Less downside protection |
| Exporters/importers | ▲Shorter commitment horizon | ▼Earnings volatility |
| FX option sellers | ▲More demand for optionality | ▼Fewer long-dated hedges |
