Lightning Poll Results: The Impact of Currency Volatility on FX hedging Policy.
On 16th November, CXC carried out a Lightning Poll asking Treasurers whether they had updated their FX hedging Policy as a result of recent currency volatility. 88 responses were received from senior treasurers globally:
| A. Yes, policy updated | 20% |
| B. Reviewed - but policy not changed | 35% |
| C. Planning to review | 17% |
| D. No plan to review | 27% |
Of those who have reviewed their FX hedging policy, 37% updated it.
CompleXCountries will be digging deeper into the issue of currency hedging through a combination of confidential Treasury Peer Calls and an FX Hedging Policy Benchmarking exercise (please let us know if you are interested in taking part)
In the meantime here are the comments that some participants volunteered along with their poll responses.
| Furthermore it triggered us to benchmark our policy at the same time, due to the changing FX environment |
| It has been reviewed, in process of being updated but planned implementation only in Q2 2023. |
| It leans towards to A. Adopting a wait and see especially when the exposures are emerging currencies against USD.Likewise for interest rate hedging. Wait till 2H 2023 for re-evaluation |
| My answer is a hybrid of A & B. We made changes if necessary but no significant changes |
| Updated and acting on that |
| Yes we have updated our FX policy in June/July but wasn’t due to the recent market volatility, it was part of our yearly renewal. However, we took a step forward to extend the hedging horizon in order to capture any opportunity. |
| although another review will happen next year |
| Although changed some of our hedging strategies |
| B on a regular 6 months basis |
| Important to differentiate between Policy and Strategy. Policy was already in place to take into account this type of context. Policy should not change according to context. Strategy might, but I would say our strategy has been more affected by increased interest rates and therefore hedging costs than volatility per se. Volatility provides opportunities as long as there are ups and downs. Sustained trends can be more problematic, particularly devaluating trends |
| The answer is B. We reviewed the policy but the wording was deemed adequate as broad enough to enable the desired flexibility during the year.I can elaborate a bit more when we have our call. |
| tolerances are within agreed levels thus we have not sought to change the policy |
| we looked at it but did not change to much other than the % that we want to be hedged for some countries (1-2) |
| we recently reviewed our policy, as part of a general regular review, however, we do not need a further review as our FX exposure is negligible |
| We’re approaching it by case to case basis |
| answer is “C”. That said, it is more due to the need to revamp the overall strategy as opposed to being a reaction to the current volatility |
| As part of a normal service review |
| Honestly, we do not have a policy yet, we are in the process of designing one |
| My FX policy is actually under review |
| already have policy to hedge known forecasts regardless of volatility |
| Even worse, we have no real hedging policy. Any bigger hedges for projects we discuss on a case to case basis and Corporate Treasury is the only team allowed to hedge anyway. |
|
No plan to review given the portfolio of currencies in place |
| We process only payments of a few thousands USD or GBP per year |
| We review yearly. We have some amendments this summer but not because of the volatility as you described but the size of the company now due to the large acquisition late last year.Our policy earlier set a threshold base on stress period like 2008/9, so while CFAR went higher this year, it did not threaten the level in isolation |
Date posted:
Tuesday, 29 November 2022