Market News

(Bloomberg) -- Global companies battered by last year’s currency swings are taking the profit hits to heart and revamping their hedging strategies in turn.

More than three-quarters of senior finance leaders in the US and the UK surveyed in January by MillTechFX, a division of currency manager Millennium Global Investments Ltd., experienced losses stemming from unhedged currency exposures last year. That dent to the bottom line is leading firms to double down on options, which give them the right to buy or sell a currency — but don’t oblige them — and extend the duration of their foreign exchange hedges.

“The risk of unexpected and sharp exchange rate movements increases uncertainty in the market,” MillTechFX Chief Executive Officer Eric Huttman said in a release on Tuesday. “Buying more FX options and increasing hedge lengths were the most popular adjustments, showing businesses’ desire for more protection and flexibility.”

Nearly a third of US and UK companies combined said they plan to increase the length of their hedges, according to MillTechFX. Some 32% said they intend to buy more foreign-exchange options, while 26% said they would increase their hedge ratios, or the amount of exposure that is hedged. The availability of bank credit, inflation and geopolitical shocks all impacted currency hedging programs, MillTechFX said.

In the US, multinational profits — particularly in the fourth quarter of 2024 — were whacked by the strong US dollar. Those profits tend to be inversely tied to the value of the greenback because a strong domestic currency weighs on foreign sales. A strengthening currency also increases costs for firms whose international divisions buy commodity products priced in dollars.

The Bloomberg Dollar Spot Index rose some 8% in 2024, the measure’s best annual performance since 2015, and traded at its strongest level in more than two years by December. The currency has fallen about 1.5% this year, buffeted by uncertainty surrounding the economic plans of the Trump administration.

UK corporations also found themselves in a tricky spot. The British pound in September rose to a two-year high versus the dollar, only to plunge at the end of the year as investor angst about government spending under the new Labour government mounted. Sterling is up about 0.7% versus the dollar in 2025 but lagging nearly all of its Group-of-10 peers.

“All this resulted in boosted levels of volatility in the fourth quarter,” said Huttman, citing a rise in currency swings ahead of the US election. The price to hedge against swings in the dollar surged prior to the Nov. 5 vote to its highest mark since the onset of the pandemic in early 2020. A separate measure of global currency gyrations, the Deutsche Bank FX Volatility Indicator, in December rose to its highest mark in more than a year.

MillTechFX surveyed 250 senior finance executives at US and UK companies with a market capitalization of between $50 million and $1 billion between Jan. 14 and Jan. 27.