(20 April 2025 – Global) US multinational corporations (MNCs) are extending currency hedge durations to protect cash flows from rapidly rising FX volatility instigated by President Trump’s tariff policies.
Instead of hedging short-term risks, clients are now hedging two to five years out as US Dollar weakness has become one of the biggest fallouts of the tariff-related market turmoil according to Mizuho Americas.
While a weaker dollar can stimulate US exporters, depleted confidence and rising uncertainty about global trade and recession fears is forcing companies to take additional steps to protect margins.
The greenback has weakened 13 percent since Trump’s inauguration with the Euro hitting a three-year high against the USD and Japanese Yen hitting a seven month high.
Higher volatility has also ramped up near-term hedging premiums for instruments such FX Options and Forward FX significantly.
“Hedging farther out along the curve maintains the same level of protection against currency movements but without the need to crystallize profit and loss generated by short-term FX swings” commented MillTechFX Head of Investment Solutions Simon Lack for Reuters.