US, UK firms step up currency hedging as war volatility rises

The US And UK firms increased currency hedges last quarter as the Iran war rattled global markets, an industry survey showed.

Corporate treasurers hedged an average of 57% of their foreign-exchange exposure using financial instruments in the first three months of the year, up from 49% in the fourth quarter, according to currency hedging and cash-management platform Miltech. That was the highest level since the company started asking corporations in the first quarter of 2024.

International events, including the U.S. impeachment of Venezuelan President Nicolas Maduro in January and a rise in energy prices as a result of Middle East conflict, helped boost hedging, according to Milltech Chief Executive Officer Eric Hutman.

The increase reflects “a more proactive approach to FX risk management as corporates respond to increased market volatility,” Huttmann wrote in a report accompanying the data.

The Bloomberg dollar spot index rose nearly 1% in the first quarter on the back of a rally in March as the Iran war fueled the greenback’s haven purchases and tempered bets on Federal Reserve policy easing.

For US multinationals, a strong dollar weighs on the value of foreign earnings and makes their products less competitive abroad, while making imported components cheaper. For UK companies, a stronger dollar versus the pound will have the opposite effect, raising the cost of imports from the US.

The JPMorgan Global FX Volatility Index hit its highest level since mid-2025 in late March, falling in subsequent weeks as traders eyed a truce between the US and Iran and developments in the outlook for the Fed.

Milltech surveyed 250 US and UK corporations, with market capitalizations ranging from $50 million to $1 billion.

The biggest currency-related impacts they cited came from higher import costs related to exchange-rate movements and increased volatility in earnings and cash flows. Firms also cite increased hedging costs, a function of wider shifts in relative interest rates.

While geopolitical shocks and market turbulence increased demand for currency hedging, firms said credit availability was the most important external factor shaping hedging decisions.

Those hedges, typically structured as forwards, swaps and options, use bank credit lines and can trigger collateral requirements. Because companies often deal with the same banks that provide revolving credit facilities, tighter credit terms can make hedging more expensive.

“In 2026, banks continue to tighten lending standards, making it harder for businesses to secure loans,” Hutman said, citing an April Fed survey of senior loan officers.