Music to a Treasurer’s Ears

Fine-tuning Corporate FX Management

With higher interest rates and global geopolitical tensions, corporate treasurers must ensure that their approach to FX risk management is suitably robust for this challenging environment.

The past few years have seen a fascinating evolution in the processes corporates employ to manage FX. Since the onset of Covid at the beginning of 2020, a series of events have added significant complications to the market. The pandemic triggered a colossal shock of volatility, and subsequent geopolitical events have sparked other market challenges in different areas of the world and across specific currency pairs. And while central banks pushed up interest rates to try to tame inflation, this significantly impacted the cost of hedging.

Andy Gage, Senior Vice President, FX Solutions, Kyriba, reflects: “What many clients are struggling with is hedging programmes built before Covid and in a zero-to-low-interest-rate environment. Now they’re having to think if they should be doing this process differently.”

While many central banks have been remarkably co-ordinated regarding their monetary policy to this point, any future policy divergence or other unexpected data or events may introduce uncertainty into the markets, which can have a knock-on impact on FX. The recent snap French election is a testament to that.

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