Hedging Strategy Review

 

Companies are rethinking their hedging strategies in light of the strong US dollar, which is undermining the value of foreign earnings. 

The WSJ Dollar Index, which measures the performance of the US currency against 16 others, is up more than 12% from this time last year and more than 8% from the start of the year. This is causing problems for S&P 500 companies, as many of them generate a portion of their revenue — on average about 30% — overseas and consolidate it in the United States.

The dollar has risen significantly against other currencies in recent months as weaker global economic growth drives investors to safe havens. The Federal Reserve’s actions to tighten monetary policy and raise interest rates also help the dollar. 

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