Research from MillTechFX reveals finance professionals at corporates are increasing their FX hedge ratios and lengths to “protect their finances from tariff-driven volatility.”
The most common changes to FX hedging programs in light of tariff-driven volatility are “increasing hedge lengths (54%) and increasing hedge ratios (43%) – defensive manoeuvres to protect themselves.”
The MillTechFX Hedging Monitor includes findings from a survey of “250 senior finance decision-makers at UK and US corporates in April 2025, which shows tariff-driven volatility is top of mind for CFOs.”
100% of businesses have been “impacted by tariff-driven market volatility, 23% negatively and this volatility has negatively impacted 52% of US corporates, and positively impacted 85% of UK firms – likely due to the dollar’s value falling against the pound.”
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 for the pound due to the weaker dollar.”
Meanwhile, US hedge lengths (5.84 months) and ratios (39%) are “the lowest they have been since we started tracking them last year – perhaps to build flexibility into their hedging programs.”
Looking ahead, we can expect “more hedging activity as tariffs continue to bite.”
Those without hedging programs “will likely have suffered from recent volatility and should consider implementing a risk management program to protect their bottom line, but they need to ensure they don’t lock in rates at the wrong time and suffer more losses.”
Eric Huttman, CEO of MillTechFX, commented:
“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.”
As noted in the update:
“The pound began the year around $1.2500, dipped to a low of $1.2100 on January 13, and then rallied to a high of $1.3014 by mid-March, marking a 3.5% year-to-date gain by the end of Q1. The US dollar experienced its steepest early-year decline since 1989, with the Dollar Index (DXY) dropping 8.4% due to aggressive trade policies, economic contraction and investor concerns over potential US withdrawal from the IMF. Meanwhile, the euro rose sharply, gaining nearly 10% against the US dollar, driven by ECB rate cuts, strong eurozone exports, and a major German fiscal stimulus.”
As stated in the update:
“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. 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.”
It was also mentioned:
“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. 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.”
The research findings revealed:
“Tariffs are also having an impact beyond FX, with all businesses surveyed stating their business had been impacted by tariff-driven volatility. US firms suffered the most, with 52% enduring a negative impact. Interestingly, 85% of UK corporates were positively impacted by tariff-driven volatility, likely down to the fact that Trump’s policies/tariffs have caused the dollar’s value to fall against the pound, making it cheaper for corporates to import from China and the US, two of the UK’s largest trading partners.”
The update concluded:
“Looking ahead, we can expect more hedging activity as tariffs continue to bite. 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.”
As stated in the update, the MillTechFX Quarterly Hedging Monitor research shares the findings “from a quarterly survey of 250 senior finance decision-makers* at UK and US corporates (described as those who have a market cap of $50mil up to $1 billion) to provide a snapshot of corporate hedging activity and insight into influential factors and other key trends.”
The data in this report is from a survey conducted “between 15th and 24th of April 2025.”
MillTechFX is an FX-as-a-Service (FxaaS) pioneer that “enables corporates to access multi-bank FX rates via an independent marketplace.”