(This May 21 story has been corrected to change the company description to “Multi-Dealer Forex Trading Platform” from “Currency Management Company,” in paragraph 2)
NEW YORK (Reuters) – Companies are increasingly looking to lock in foreign exchange rates for longer, as they seek to shield profits from potential fallout from currency fluctuations that could follow elections expected around the world this year.
The largest companies are the most risk averse, implementing the longest hedging windows – 7.5 months on average – according to research based on a quarterly survey of 250 senior financial decision-makers at UK and US companies conducted by multi-dealer forex platform MillTechFX last month.
Hedging windows refer to the time frames that companies use when purchasing forex hedges, and companies looking to lengthen this duration typically prefer longer-dated options or futures contracts over shorter-dated options.
The survey showed that nearly half of all participants said they plan to increase the duration of their hedging due to the upcoming elections.
“In a year in which more than half of the global population in 80 countries heads to the polls, it is not surprising to see geopolitical factors significantly impact corporate FX hedging decisions,” Eric Houtman, CEO of MillTechFX, said in the research note.
The survey also showed that geopolitics and central bank policy were the biggest factors influencing corporate currency hedging in the first quarter.
The US dollar rose by 3.2% this year against a basket of major currencies thanks to the relative strength of the US economy.
