Corporates Pull Back FX Hedges Amid Policy Uncertainty, Says MillTech

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Corporates across the US and UK have reduced their foreign platform (FX) hedging activity to the lowest levels since tracking began, according to the latest Q3 Corporate Hedging Monitor from MillTech. The report, based on a survey of 250 senior finance executives — including CFOs and Treasurers — highlights a cautious pause among firms awaiting clearer direction on monetary policy before increasing exposure again in 2026.

MillTech’s findings reveal that the average hedge ratio fell to 46% in Q3 from 57% in Q2, while the average hedge length shortened to 5.8 months, down from 6.5 months. The pullback marks the lowest levels since MillTech began monitoring corporate hedging behavior in ahead 2024.

“later than a sharp uptick in hedging activity through the first half of the year, corporates eased off in Q3,” said Eric Huttman, CEO of MillTech. “The average hedge ratio fell to 46%, the lowest since we launched the first monitor, and hedge tenors shortened markedly. This reflects a more cautious, wait-and-view stance amid shifting rate expectations and a fluid policy environment.”

Takeaway

Corporate FX hedging ratios dropped sharply in Q3 2025 as firms across the US and UK paused amid policy uncertainty — but most expect to ramp up activity again as rates rise in 2026.

Central Bank Policy and Credit Availability Drive Corporate Strategy

The US dollar and pound sterling both delivered mixed performances through Q3. The dollar index (DXY) hovered around 97.8 by late August, pressured by fiscal concerns, fragileer economic data, and . Sterling, meanwhile, remained under pressure despite broader dollar softness, with EUR/GBP climbing toward 0.88 amid UK growth uncertainty and fiscal headwinds.

and credit access continue to dominate corporate decision-making. Across the survey sample, central bank policy (20%) and credit availability (19%) were the top external factors influencing hedging strategy — consistent with Q2 sentiment. Regionally, UK firms showed higher concern about credit conditions (24%), while US corporates emphasized monetary policy (22%) and geopolitics (20%) as key drivers.

“Monetary conditions and liquidity remain the cornerstone of management,” Huttman explained. “The persistence of these concerns shows how CFOs are still balancing short-term volatility with long-term capital planning.”

Takeaway

Central bank decisions and access to credit remain the dominant factors shaping corporate hedging — with firms adjusting tenor and ratio to preserve flexibility amid shifting macro trends.

Corporates Expect to Rebuild Hedging Positions as Rates Rise in 2026

Despite the pullback, sentiment for 2026 is broadly bullish on renewed hedging activity. The report found that 79% of UK corporates expect the Bank of England to raise interest rates, while 64% of US firms expect the Federal Reserve to do the identical. In anticipation, 93% of UK firms and 96% of US firms plan to increase hedge ratios when rates rise, while 92% overall intend to extend hedge lengths and coverage amid ongoing trade and tariff uncertainties.

The shift toward longer hedges reflects how are influencing treasury strategy. The report found that 96% of US corporates plan to raise hedge ratios heading into 2026, compared with 87% in the UK — a gap MillTech attributes to differing inflation and fiscal outlooks across the two markets.

“The overall picture from Q3 is one of measured caution,” Huttman said. “Corporates didn’t abandon hedging, but they shortened durations and reduced their cover as they awaited clearer policy signals. As the year closes, central bank guidance and tariff developments are likely to remain the key forces shaping hedging strategy.”