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Corporate finance teams are responding to the uncertainty in global markets by increasing the length and size of their currency hedges, according to MillTech. The firm surveyed 250 senior finance decision-makers at U.S. and UK companies and found that every one of them—100 percent—believe tariff-driven market volatility has impacted their business.
However, the organizations are not all feeling the same impacts. While 52 percent of U.S.-based companies have experienced significant negative effects of market trends, 85 percent of UK firms reported being positively impacted, likely because of the drop in the dollar’s value vs. the pound.
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In the first quarter of 2025, “the U.S. dollar experienced its steepest early-year decline since 1989, with the Dollar Index (DXY) dropping 8.4 percent due to aggressive trade policies, economic contraction, and investor concerns over potential U.S. withdrawal from the IMF [International Monetary Fund],” says Eric Huttman, CEO of MillTech. “Meanwhile, the euro rose sharply, gaining nearly 10 percent against the U.S. dollar, driven by ECB [European Central Bank] rate cuts, strong Eurozone exports, and a major German fiscal stimulus.”
Surveyed companies have responded by re-examining their foreign exchange (FX) hedging practices. The most common changes to FX hedging in light of tariffs are increasing hedge lengths (cited by 54% of respondents) and increasing hedge ratios (43%). In the UK, the average hedge length has reached 6.57 months—the longest in a year—suggesting British businesses are locking in rates before they become less favorable to the pound. At the same time, the average U.S. hedge length of 5.84 months and ratio of 39 percent are the lowest they have been in more than a year.
When asked what was driving changes to their hedging programs in Q1, survey respondents pointed to volatility as the most significant external factor influencing decision-making (cited by 24%). “This tariff-driven volatility created challenges for corporates, and many doubled down on hedging to protect their bottom lines,” Huttman says.
“Looking ahead, we can expect more hedging activity as tariffs continue to bite,” he adds. “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.”
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