- 86% of North American corporates are planning on increasing hedging activity
- 66% intend to increase hedge length while 29% intend to increase hedge ratios
- 93% of corporates’ bottom lines were affected by the strong dollar
London, 11 September 2024 – A new report from FX-as-a-Service pioneer, MillTechFX, has revealed that over eight in ten (86%) of North American corporates intend to increase their hedging activities ahead of the upcoming US election on 5 November 2024, despite 73% reporting an increase in hedging costs.
Nearly two-thirds (66%) plan to extend the length of their hedges, while 29% aim to increase their hedge ratios, providing them with more protection from any impact on currency markets. The most hedged currency pair is USD/CAD, with 30% of respondents prioritizing it, followed closely by USD/CNY (28%), EUR/USD (25%), and GBP/USD (25%).
Corporates’ biggest FX-related concerns surrounding the coming election are the impact of policy changes on currency values (44%), unpredictable market movements (38%), increased volatility (37%) and counterparty risk (35%).
The MillTechFX North American Corporates CFO FX Report 2024 is the latest instalment of the firm’s global research series, surveying 250 senior finance decision-makers at North American corporates to reveal their FX challenges, hedging strategies, their drive towards automation and how they plan on managing currency risk around the upcoming US election.
It also found that the stronger dollar has impacted 93% of North American corporates’ bottom lines, while 93% said the stronger dollar has weakened their company’s competitive position in international markets. Other stronger dollar-related concerns include profit margin erosion (43%), forecasting financial performance (41%) and reduced international sales (38%). Looking ahead, more than nine in ten (92%) respondents believe that the dollar will continue to strengthen over the next year.
Other notable findings include:
- The rise of AI – 100% of corporates are now exploring the use of AI in FX processes. Risk management (46%), process automation (39%) and FX operations (36%) were the key areas of focus.
- Increased hedging – 82% of corporates now hedge their forecastable currency risk, a slight increase from last year’s 81%. The mean hedge ratio was 49% which is likely to increase as we approach the election. Meanwhile, the mean hedge length was 5.05 months.
- Reasons for not hedging – The primary reasons for not hedging were that capital could be better deployed elsewhere (47%), expense (33%) and insufficient credit lines (33%).
- Credit crunch – Securing credit lines was the biggest challenge corporates faced when handling their FX operations (31%), suggesting banks’ risk appetite is falling and costs are rising.
- The automation of manual processes – 36% of corporates said automating manual processes was a key priority, up from 32% the previous year.
- Outsourcing FX processes – Settlement (34%), risk identification (33%) and trade execution (32%) were the key FX processes corporates are considering outsourcing in 2024.
Eric Huttman, CEO of MillTechFX commented: “Recent market fluctuations, geopolitical tensions, diverging monetary policies and macro-economic challenges have introduced rising unpredictability in the FX market. The upcoming U.S. presidential election on November 5, 2024 will add even more fuel to this fire. For instance, speculation about a potential Trump-Vance administration suggests a possible push to weaken the U.S. dollar, given their stance on making U.S. exports more competitive.
“Corporates also had to contend with the unexpected resilience of the US dollar which is causing significant challenges. Against this backdrop, it is crucial for CFOs to reassess their FX strategies. Hedging serves as a vital tool for managing uncertainty, similar to how fire insurance protects against unexpected damage, so it’s positive to see corporates are taking a proactive approach to risk management.
“It’s clear that the hype around AI is now too big to ignore with every corporate surveyed now actively exploring its potential. The primary focus of this exploration is risk management, with 46% of corporates applying AI to predict and mitigate risks, safeguarding against adverse currency fluctuations. Given corporate’s reliance on manual processes for executing transactions, it’s no surprise to see AI and automation emerge as a top priority.”
To learn more about how corporates are preparing for the US election, the impact of the stronger dollar, their hedging strategies and priorities, read the full report here: https://milltechfx.com/resources/currency-insight-and-education/the-mill-tech-fx-north-america-corporate-cfo-fx-report-2024/
-ENDS-
About MillTechFX
MillTechFX is an FX-as-a-Service (FXaaS) pioneer that enables corporates and fund managers to access multi-bank FX rates via an independent marketplace.
Its end-to-end solution automates the FX workflow and ensures transparent best execution – saving clients time and costs. It offers a fixed fee service model, including third-party transaction cost analysis to ensure total transparency.
MillTechFX harnesses the purchasing power of Millennium Global, one of the world’s largest currency managers, with $25.9bn group hedges assets and transactions over $592bn in annual FX volume**. Via the MillTechFX marketplace, clients can directly access preferential FX rates and credit terms from up to 15 Tier 1 counterparty banks.
Headquartered in London, the world’s largest FX hub, MillTechFX is authorised and regulated by the UK’s Financial Conduct Authority (FCA), registered with the USA’s National Futures Association (NFA) and Canada’s Financial Transactions and Reports Analysis Centre (FINTRAC). Our European subsidiary, MillTechFX (Europe) SAS is authorised as an Investment Firm by The Prudential and Resolution Control Authority (ACPR in France) and authorised and regulated by The Financial Markets Authority (AMF).
Media contact
Michael Deeny/Angus Guironnet
Chatsworth
+44 (0)207 440 9780
MillTechFX@chatsworthcommunications.com
Important disclosures
This document, including the information provided herein, is provided for information purposes only and does not constitute an invitation or offer to subscribe to or purchase any of the products or services mentioned.
The information contained is intended for Professional Clients (or elective professional clients only). MillTechFX does not target retail clients as the products offered by MillTechFX are not suitable for or made available to retail clients.
The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations. You should consult your investment, tax, legal accounting or other advisors.
*Group Hedged assets as 1 January 2024 and is a combination of USD 14.7 billion hedged assets (all strategies that include hedging, up to the maximum amount that can be hedged) managed by Millennium Global Investments Limited and USD 11.2 billion executed by MillTechFX. Millennium Group comprises Millennium Global Investments Limited, Millennium Global (SAS) Europe and Millennium Global Treasury Services Limited.
**The 2023 annual traded volume refers to all Millennium Group activity. Millennium Group comprises Millennium Global Investments Limited, Millennium Global (SAS) Europe and Millennium Global Treasury Services Ltd.
MillTechFX is the trading name of Millennium Global Treasury Services Limited (MGTS). MGTS is authorised and regulated by the Financial Conduct Authority (FRN 911636) and is a company registered in England and Wales with company number 11790384. The registered address is 88 Wood Street, London, EC2V 7QR, United Kingdom.
MillTechFX Americas Inc is registered with the National Futures Association as a Commodity Trading Advisor (NFA ID: 0545635).
*This white paper examines the data and results of a survey conducted by Censuswide on MillTechFX’s behalf conducted between 14 June and 25 June 2024 of 250 CFO’s, treasurers and senior finance decision-makers in mid-sized corporates (described as those who have a market cap of $50mil up to $1 billion), in North America.
*The full list of job titles surveyed and included within this report is as follows: Accountants, Chief Financial Officers (CFO) Financial Analysts, Financial Accountants, Financial Consultants, Financial Manager, Analysis Managers and Treasurers.
