Corporate treasurers in the U.K. are changing their dollar hedging strategies because of the sharp fall in the U.S. currency in the last few weeks. Kai Fisher, in corporate fx sales at Bank of America in London, said, "[Treasuries] are being more opportunistic with their hedging." Some treasurers, including Robert Williams, treasurer at drinks company Allied Domecq in Bristol, are considering switching from using forwards to buying options to cap and floor their dollar exposure. Sterling was trading at USD1.94 against the U.S. dollar on Wednesday, compared to USD1.85 a month ago.
"We have been fine tuning our currency hedging strategy," said Williams. Allied Domecq carries most of its debt in U.S. dollars and receives dollar assets from its business. The group uses a combination of forwards and some options to hedge its currency risk, but Williams said it may increase its options hedging in order to lock in its downside risk. Another strategy shift is to alter the amount of U.S. dollar debt companies hold. David Blackwood, treasurer at ICI in London, said the group is looking to use cross currency swaps to synthetically decrease its dollar debt.
