Key global trends shaping corporate FX hedging in 2025

In an increasingly volatile global economy, managing currency risk has become a top priority for businesses worldwide. As exchange rates fluctuate and financial pressures mount, firms are turning to FX hedging strategies to safeguard their bottom lines.

This blog explores the key trends shaping corporate FX hedging in 2025, including the growing adoption of hedging practices and the impact of local currency movements on corporate decision-making.

 

Hedging is crucial for tackling currency risk

Why is hedging becoming more important for businesses?

As financial uncertainty grows, an increasing number of businesses worldwide are taking proactive steps to protect themselves. In fact, 81% of companies across Europe, North America, and the UK are now actively hedging their currency exposure.

Leading the charge is Europe, where a remarkable 86% of corporates are now hedging their FX risk—a dramatic rise from just 67% in 2023. This surge is likely driven by a combination of tangible market forces: rate differentials and sustained dollar strength have created persistent volatility, making it increasingly important for corporates to manage their FX exposure.

What are the consequences of not hedging currency exposure?

As market conditions continue to shift, 52% of businesses globally that don’t currently hedge their currency exposure are now reconsidering their approach. UK corporates are at the forefront this rethink, with 68% exploring new hedging strategies. What’s prompting the change? Most likely the financial consequences of inaction: three in four businesses worldwide have recently reported losses due to unhedged FX risk—underscoring the urgent need for more proactive and robust currency risk management.

 

A cohesive approach to hedging strategies

How consistent are hedging strategies globally?

Corporate hedging strategies are demonstrating notable consistency across the globe. The average global hedge ratio is 48%, reflecting a broad alignment in hedging practices. Here's a closer look at how different regions compare:

• North America and Europe: Both regions report hedge ratios of 49%.
• UK Corporates: Slightly lower at 45%.

When it comes to hedge duration, the variation is minimal, which further points to a uniform approach in managing currency risks:

• Global average hedge duration: 5.3 months.
• UK Corporates: Leads with an average hedge duration of 5.5 months.

What do longer hedge tenors and consistent hedging strategies indicate?

Longer hedge tenors typically indicate that firms are aiming to secure protection over an extended period, likely reflecting their efforts to gain stability amid a turbulent year for the pound. The limited variation observed in hedging strategies suggests that corporates globally are responding in a broadly uniform manner, adopting consistent risk management approaches as they navigate shared global uncertainties.

 

How are domestic currency movements impacting businesses?

Domestic currency movements are having a pronounced impact on corporates bottom lines, with 88% of firms globally reporting effects. North American firms have borne the brunt, with 92% citing challenges tied to a stronger U.S. dollar.

How have trade tariffs affected currency movements?

Tariffs imposed by the the Trump administration, alongside retaliatory levies from global trade partners, have added pressure to markets. These developments have disrupted markets and raised the cost of cross-border trade for both large and small economies. Interestingly, in the immediate aftermath of U.S. tariff announcements, the dollar has shown unexpected weakness—suggesting that the financial repercussions may initially be felt domestically before reverberating abroad.

How have the euro and pound movements affected firms?

Meanwhile, in Europe, 88% of corporates reported being affected by euro volatility. Similarly, in the UK, of firms felt the impact of a strengthening pound. However, there’s a notable difference in the consequences:

• 42% of UK firms experienced negative consequences from pound appreciation.
• In comparison, only 28% of European firms were negatively impacted by euro movements.

 

Tighter lending criteria and heightened FX costs

How is access to credit affecting corporates?

Access to credit has emerged as one of the top concerns for corporates worldwide:

• In North America, 31% of corporates identified credit access as their primary challenge.
• In the UK, 74% reported greater difficulty securing credit, while 79% noted an increase in fees from credit providers.

“Tighter lending criteria is a common feature of turbulent economic times. If the average corporate earnings take a downturn, then lenders perceive a higher risk of defaulting on loans. This causes them to allow only the most creditworthy companies to borrow, particularly given higher interest rates. This tends to cause liquidity headaches and restricted investment opportunities.” Tom Hoyle, Head of Corporate Solutions at MillTech

How have hedging costs changed for businesses?

Another key trend impacting businesses globally is the rise in corporate FX hedging costs, with four out of five corporates reporting higher costs over the past year:

• Europe experienced the most significant increase in hedging costs, with 98% of respondents noting higher costs.
• UK businesses were less affected but still saw a rise, with 70% reporting increased hedging costs.
• North American businesses experienced a similar trend, with 73% reporting higher hedging costs.

Higher hedging costs demand a more proactive and considered approach from treasury teams, given that hedging decisions now carry more weight. CFOs must carefully assess their exposures, determine their hedging capacity, and be sure to choose the right financial instruments. Most importantly, they must strike a delicate balance between the rising costs of hedging and the potential risks of leaving exposures unprotected.

 

Please refer to our Research Disclosure Page for more information on the data referred to in the above.