Time for a rethink

The weak dollar and high implied volatility in currency markets has claimed a number of victims in the corporate sector, with some notching up significant mark-to-market losses on currency hedges. A number of firms have been forced to take a fresh look at their hedging strategies. By Gail Mwamba

A drastic decline in the value of the dollar and increased implied volatility in the foreign exchange markets has left some corporates battling to keep their budget rates afloat, while simultaneously mitigating sizeable mark-to-market losses on currency hedges.

The twofold problem, which has mainly hit US-based companies with foreign currency liabilities and non-US corporates with dollar revenues, has led firms to increase their use of derivatives and, in some cases, implement more complex cost