Corporates eye FX options as hedging costs shrink

With hedge ratios tipped to rise, dealers say treasurers are increasingly open to optionality

The prospect of interest rate cuts in the US and emerging markets this year is likely to make foreign exchange hedging cheaper for corporates, which dealers believe will result in increased hedge ratios.

“It’s very early in the year, but we’re already getting the feeling that any corporates that let their hedge ratios decline at the end of last year are looking to reinstate them,” says a senior FX structurer at a UK bank.

To do so, dealers say corporates are increasingly comfortable with including