KAREN JOY BACUDO
Finance Editor
Companies increased their foreign exchange hedging activity in the first quarter, according to a MillTech survey of 250 senior finance decision-makers at UK and US corporates.
The average hedge ratio rose to 57% from 49% in the previous quarter, while average hedge tenor increased to 6.62 months from 6.33 months.
Both measures were the highest in MillTech’s tracking series since it began monitoring hedge ratios in early 2024. The tenor figure was the longest recorded since the third quarter of 2024.
The findings suggest finance teams took a more defensive stance as geopolitical tensions filtered into currency markets. Nearly all respondents (96%) reported experiencing losses from unhedged foreign exchange exposure during the quarter.
Average losses on those unhedged exposures were £908,000, down sharply from more than £2 million per quarter on average during 2025.
Some companies still reported much larger hits, with 14% saying they had lost between £1 million and £4.9 million from unhedged exposure.
Cost pressures
Asked about the main effects of geopolitical developments on foreign exchange, respondents most often cited higher import costs and greater volatility in earnings or cash flow, with both selected by 22%. Higher hedging costs followed at 18%.
The pattern suggests treasury teams were managing not only direct currency swings but also knock-on effects on margins and financial planning. Import-heavy businesses are often among the first to feel those shifts when exchange rates move sharply.
The survey also asked finance leaders which external factors were shaping hedging decisions. Credit availability ranked highest at 18%, while central bank policy and inflation each stood at 16%.
Those responses indicate hedging decisions are being made against a broader financing and macroeconomic backdrop, rather than solely in response to spot currency moves. Borrowing conditions and interest-rate expectations can influence how far companies are willing to extend cover and at what cost.
Survey scope
MillTech’s quarterly monitor surveyed finance professionals, including chief financial officers, accountants, financial analysts, financial consultants, financial managers, analysis managers, and treasurers. The companies covered were UK and US corporates with market capitalisations ranging from $50 million to $1 billion.
The results offer a snapshot of how mid-sized and larger corporates are responding to sustained volatility in foreign exchange markets. For many, hedging has become a more prominent part of financial risk management even as the cost of that protection has risen.
MillTech linked the rise in hedge ratios and hedge tenors to the reduction in average losses from unhedged exposures. The figures do not show that losses have disappeared, but they suggest broader use of hedging may have reduced the scale of damage for some companies.
That remains relevant because the survey indicates foreign exchange risk is still widespread. If 96% of respondents suffered losses despite increased hedging activity, many treasury teams are still carrying at least some unprotected exposure or facing market moves large enough to break through existing protection.
“Q1 2026 showed that firms are doubling down on defensive FX risk management strategies as they steer through even greater uncertainty. It was a challenging quarter, but businesses prepared themselves well, hedging their exposures to protect capital and boost their businesses’ stability. Our report illustrates just how rewarding strong FX hedging strategies can be during times of intense volatility, underscoring the financial impact of FX risk management. That said, losses of nearly £1 million per firm from unhedged FX risk show that currency volatility remains a multi-billion-pound problem on both sides of the Atlantic,” Eric Huttman, Chief Executive of MillTech, said.
