North American firms face a new era of FX risk in 2026

For years, currency risk has often been relegated to the background, something for the treasury team to quietly manage - but in 2025, it has pushed its way firmly into the spotlight. A mix of currency shocks, trade disruptions and US dollar volatility has elevated FX to a strategic priority for the North American corporate cohort across the US and Canada.

Our latest North America Corporate CFO FX Report shows just how quickly the landscape is changing and how finance leaders are responding to shield margins as we head into 2026.

 

Key takeaways:

Why has FX risk become a strategic priority?
Tariffs, US dollar volatility and trade disruption have elevated FX risk management from a treasury function to a core CFO concern across North America.

How are tariffs affecting corporate profitability?
69% of North American corporates report reduced competitiveness, with 87% forced to adjust sourcing or manufacturing strategies in response.

How are firms responding to rising currency volatility?
91% of corporates now hedge FX risk, amid 83% experiencing losses from previously unhedged currency exposure in 2025.

What is holding FX risk management back?
Rising hedging costs (94%) combined with fragmented systems (32%) and manual processes (30%) are limiting efficiency, transparency and control.

How are corporates modernising FX operations?
Firms are investing in FX automation and AI-driven risk identification to improve visibility, accuracy and governance across the FX lifecycle.

 

Tariffs harm corporates competitiveness

With sweeping tariffs introduced by the Trump administration in February 2025 - including the blanket 10% tariff on most imports on “Liberation Day” - nearly seven in ten firms (69%) report that their profitability or competitiveness in international markets has been negatively affected. Both the smallest and largest companies are feeling the strain, showing that the impact cuts across both size and sector.

Against this backdrop corporates have been forced to react quickly as margins come under pressure. A significant 87% of firms have adjusted their sourcing or manufacturing strategies in response to the shifting tariff landscape. The uncertainty is feeding directly into FX concerns, with 36% worried about the impact of policy changes on currency values, while 34% are delaying major decisions due to elevated market uncertainty.

Yet despite the disruption, confidence remains surprisingly resilient: 84% of corporates remain optimistic about the future impact of tariffs, signalling belief that short-term pain may ultimately give way to longer-term strategic opportunities.

 

FX volatility drives record hedging levels

Amid the tariff announcements, currency volatility surged to levels last witnessed during the collapse of Silicon Valley Bank, and the impact on unhedged firms has been severe. Eight in ten (83%) corporates have experienced losses due to unhedged FX risk, underscoring just how quickly market swings can erode profitability.

In response, hedging activity has risen to the highest level we’ve recorded in the past three years as firms move to shield margins from further shocks. 91% of corporates now hedge their FX risk, up sharply from previous years - and even smaller firms, despite their typically lower exposure, are now participating at much higher levels.

Firms are also now rethinking the mechanics of their hedging strategies. The most common adjustment? Extending hedge lengths (64%), as they look to lock in certainty amid short-term instability.

"Short-end volatility is spiking so it makes strategic sense for firms to extend the tenor of FX hedging instruments. Market spreads on short-end instruments are increasing as more market participants look to buy near-term protection. 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".

Simon Lack, Head of Investment Solutions at MillTech

 

Operational complexity and rising FX costs add pressure for corporates

Despite the FX market being the largest and most liquid in the world, many corporates still face major operational challenges in managing foreign exchange risk. The biggest challenges remain deeply rooted in day-to-day processes, with firms highlighting demonstrating best execution (33%), fragmented systems and workflows (32%) and manual processes (30%) as their top three.

These operational hurdles are far from trivial. Among those not currently hedging, a striking 83% pointed to burdensome hedging infrastructure as their primary barrier, reinforcing the view that operational inefficiencies are actively preventing some firms from managing their risk.

While access to credit has fallen down the list of headline concerns, conditions remain tight. 46% of firms report stricter lending criteria, and 69% are facing higher interest rates or fees, making it harder and more expensive to support FX strategies.

At the same time, the cost of hedging is rising sharply. An overwhelming 94% of firms say their hedging costs have increased, with smaller companies being hit the hardest - over a third saw costs more than double.

As these expenses rise, so does the demand for clarity. Cost transparency has now become the number-one priority for over a third of corporates (34%), overtaking automation. For many firms, particularly smaller businesses, this creates a tough dilemma: is it more costly to hedge or to risk not hedging at all?

 

Corporate FX goes digital

In light of struggles with fragmented workflows, the shift away from manual FX processes is gathering real momentum. Traditional booking methods such as phone (29%) and email (24%) are in decline, with corporates increasingly turning to digital tools instead. Four in ten firms now instruct FX trades via their own internal systems or web apps, up significantly from 27% and 31% last year, respectively.

The pivot to digital is being accelerated by strong demand for automation across the entire FX lifecycle. Firms are focusing on processes that improve speed, accuracy and control with the most in-demand capabilities including automated price discovery (34%), end-to-end workflow automation (33%) and real-time risk identification (30%).

Artificial intelligence is becoming a core part of this transformation, with every company we surveyed actively exploring how AI can enhance their FX operations. The top use case is process automation (43%), as firms look for faster, smarter and more scalable ways to manage increasingly complex workflows. Close behind is risk identification (42%), with corporates turning to AI to spot exposures earlier and with greater accuracy as market volatility intensifies.

US vs Canada: How FX strategies differ

The US and Canada are more than just close neighbours; they have one of the strongest political economic relationships in the world. However, recent foreign policy gear shifts in the US have put this friendship on rocky ground, particularly with US tariffs.

More Canadian firms report losses from unhedged FX risk (89%) than those in the US (81%) - a notable contrast given that Canadian corporates actually hedge more frequently and more aggressively, with 97% hedging FX risk compared with 88% in the US.

Amid these losses, Canadian corporates have made more tariff-driven operational changes than their US counterparts, with 96% adjusting their sourcing or manufacturing strategies in response, compared with 83% of US corporates. Yet despite the disruption, Canadian businesses remain more optimistic about the year ahead, with 89% expressing confidence over the next 12 months, compared with 81% in the US.

When it comes to digitisation, both markets are accelerating automation but with different priorities. In Canada, reporting is the top area of automation investment (38%), whereas in the US the focus is on price discovery (36%). Their AI strategies also diverge: Canadian firms are most interested in using AI to enhance operations (44%), while US corporates place greater emphasis on AI for process automation (46%).

 

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