US and Canadian Companies Boost FX Hedges Amid Rising Costs and Volatility

North American companies are increasing their foreign exchange hedges to protect against currency risks, despite higher hedging costs. Over 90% of US and Canadian firms surveyed by MillTech are hedging against foreign exchange risks, up from 80% two years ago. The dollar's poor performance and a nearly 15% increase in the euro have negatively impacted profitability and competitiveness in international markets. Companies are opting to pay invoices in local currencies and adjusting the duration of their protection.

Title: North American Companies Boost Foreign Exchange Hedges Amid Currency Volatility

North American companies are increasingly turning to foreign exchange (FX) hedges to mitigate currency risks, despite rising hedging costs. A recent survey by MillTech revealed that over 90% of US and Canadian firms are now hedging against foreign exchange risks, a significant increase from 80% two years ago [1]. This surge in hedging activities is driven by the dollar's poor performance and a nearly 15% appreciation of the euro, which has negatively impacted profitability and competitiveness in international markets.

The dollar's depreciation has led companies to pay invoices in local currencies and adjust the duration of their protection. This strategy aims to shield against the volatility of currency fluctuations, which can significantly impact financial statements and operational efficiency.

The trend is particularly evident in the mining sector. American Battery Technology (ABAT), a critical mineral company, recently secured a $1 million agreement with the U.S. Department of Energy's Argonne National Laboratory ReCell Center to advance lithium manufacturing technologies [2]. This move is part of broader efforts to reduce reliance on foreign supply chains and support U.S. energy security. Similarly, Canadian mining giant Barrick Gold Corporation is investing $2 billion in expanding its Lumwana copper mine in Zambia, signaling a strategic pivot away from Mali amidst escalating tensions [3].

The dollar's status as the global reserve currency presents unique challenges and opportunities. While it facilitates international trade and investment, it also creates a "dollar trap" that requires foreign countries to run current account surpluses to obtain dollars for trade and debt repayment [4]. This dynamic has led to a significant deterioration in the U.S. Net International Investment Position (NIIP), which tracks the difference between external financial assets and liabilities. The NIIP has declined from less than negative $1.7 trillion in 2008 to over negative $24 trillion at the end of March 2025 [4].

In conclusion, North American companies are taking proactive measures to manage currency risks by increasing their foreign exchange hedges. This trend is driven by the dollar's poor performance and the euro's appreciation, which have negatively impacted international profitability. The mining sector, in particular, is adapting to these challenges through strategic investments and partnerships.

References
[1] Reuters. (2025). American Battery Technology ABAT gains on deal with U.S. National Laboratory for lithium tech. Retrieved from https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3TC16X:0-american-battery-gains-on-deal-with-us-national-laboratory-for-lithium-tech/
[2] Africa Business Insider. (2025). Canadian miner shifts focus to Zambia with $2 billion investment deal amid Mali tensions. Retrieved from https://africa.businessinsider.com/local/markets/canadian-miner-shifts-focus-to-zambia-with-dollar2-billion-investment-deal-amid-mali/p821wm4
[3] The Fairobserver. (2025). The problem with the dollar: when one nation's currency becomes the world's. Retrieved from https://www.fairobserver.com/world-news/the-problem-with-the-dollar-when-one-nations-currency-becomes-the-worlds/