Australian money managers and corporates are increasing their focus on foreign exchange risk management as offshore exposures grow, according to the latest CommBank FX Barometer.
The quarterly survey of around 1,000 Australia-based businesses that use the Australian dollar in their operations shows money managers are becoming more active in managing FX risk as foreign exposure increases, while corporates have also become more active in managing currency risk since the April survey.
Money managers increasing offshore exposure
CBA Head of Foreign Exchange, International & Geoeconomics Joseph Capurso said Australian money managers are allocating more capital offshore, with foreign exposure highest in hedge funds and private equity.
“Foreign exposure is highest among hedge fund and private equity investment, reflecting the global nature of those opportunity sets,” Capurso said.
The survey found most money managers expect to increase their exposure to foreign currency assets over the next quarter. Almost 90 per cent of super funds, almost three-quarters of investment managers and just over half of insurers said they expect to increase their FX exposure.
“Money managers hedge their foreign currency exposure to protect asset values and income from fluctuations in the Australian dollar,” Capurso said.
Money managers are most willing to hedge assets where FX volatility can obscure stable underlying returns. This explains why hedge ratios are highest for infrastructure and property, at around 80 per cent, and also high for fixed income and listed equities, at about two-thirds. By contrast, hedge fund and private equity investments remain lightly hedged.
Looking ahead, more than nine in 10 super funds and insurers surveyed expect to increase their hedge ratio over the next three months. A modestly lower 83 per cent of investment managers expect to increase their hedge ratio. Not one of the 136 money managers surveyed plans to decrease their FX hedge ratio.
Capurso said the largest expected increases in hedging appetite are in asset classes with relatively low current hedge ratios, including hedge funds and private credit.
The survey also found hedge tenors – the duration of a hedge – differ widely by asset. Infrastructure and property, which typically have longer and stable cashflows, are hedged for around 13 months, while hedge funds and private equity are hedged for less than four months.
Forward contracts remain the main hedging tool for money managers, though options, FX swaps and cross-currency swaps are widely used. The timing of executing hedges differs by type of money manager: insurers favour calendar-based hedging, while super funds and investment managers favour hedging around transactions.
Corporates remain active in FX hedging
CBA Economist and Currency Strategist Carol Kong said Australian corporates have become more active in managing FX risk, with the proportion of businesses hedging and the average share of exposures hedged both increasing since April.
“Corporate hedging activity has picked up since the April survey, reflecting a more proactive approach to managing FX risk,” Kong said.
Corporates have largely maintained their end-December 2026 forecast for AUD/USD at around 0.72, but now expect the Australian dollar to weaken over the first half of 2027 and end June 2027 near 0.68.
The survey found around 84 per cent of importers, 70 per cent of exporters and 79 per cent of businesses that both import and export currently hedge their FX exposures. Businesses that both import and export recorded the largest increase, lifting their average hedged proportion from 67 per cent to 71 per cent.
Large businesses remain the most active hedgers. Almost all businesses with annual turnover above $A725 million currently hedge their FX exposures, compared with just over half of businesses with annual turnover between $A5 million and $A20 million.
Most corporates continue to expect FX exposures to increase over the next three months, although sentiment has become more mixed since April. A similar share of importers, 77 per cent, expects FX exposures to rise, but the proportion of businesses that both import and export expecting higher FX exposures fell from 86 per cent to 74 per cent.
Kong said short-dated hedging remains dominant across corporates, particularly among corporates with turnover below $A725 million.
“Around half of importers and businesses engaged in both importing and exporting hedge their FX exposures for less than three months,” Ms Kong said.
The US dollar remains the dominant foreign currency exposure for Australian corporates across trade profiles and customer segments, reflecting its central role in international trade and financial markets.
FX forwards remain the preferred hedging instrument for managing FX risk across all trade profiles, business sizes and industries. The survey found businesses favour forwards because of their simplicity, cost-effectiveness and ability to lock in exchange rates with certainty.
You can read the full report here.
