NEW YORK, Aug 28 (Reuters): US corporations are turning to foreign exchange options again to protect their cash flow as they fear the US presidential election and diverging central bank interest-rate policies could spark a period of currency volatility, bankers said.
Currency swings, which can hike costs, disrupt cashflows and dent earnings, are far less pronounced than from 2020 to 2022, making option hedges cheaper than before. Prices soared during the COVID-19 pandemic and as central banks started hiking interest rates to tame inflation.
Ninety per cent of US companies surveyed in April by currency trading platform MillTechFX planned to buy more options. US corporations hedged 48 per cent of their currency exposure in the second quarter, up from 46 per cent in the previous quarter, a MillTechFX survey of another 250 companies showed.
"As macroeconomic conditions evolve and potentially lead to increased currency volatility, (companies) are becoming more aware of the effects on their balance sheets," said Nick Wood, head of execution at MillTechFX.
US cos return to currency options to hedge election
FE Team | Published: August 29, 2024 00:28:38
US cos return to currency options to hedge election
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