CommBank barometer shows high FX hedging among firms

CommBank has launched a quarterly FX Barometer examining how Australian businesses manage foreign exchange market movements. The first edition points to high levels of hedging among corporates and superannuation funds.

The survey draws on responses from about 1,000 Australia-based corporates and superannuation funds with foreign currency exposure through their operations. It examines foreign exchange expectations, the scale of currency exposure, and the extent to which organisations hedge against market moves.

Initial findings suggest many businesses increased currency protection during a period of geopolitical and economic uncertainty. The survey ran from mid-February to early April, beginning before the Iran war and ending shortly after a ceasefire was announced.

Importers showed some of the strongest use of hedging tools, covering about 80 per cent of their currency exposure. This points to a broad effort to limit the effect of exchange-rate swings on costs.

Exporters that hedge were covering an even larger share of exposure, at 86 per cent. The figures suggest businesses selling overseas were locking in exchange rates during periods when the Australian dollar weakened.

Companies that both import and export showed a different pattern, hedging around two-thirds of exposure. This reflects the partial offset that can arise when a business both earns and spends in foreign currencies.

Market Pressure

The barometer launches as corporate treasury teams face a more unsettled currency environment. Sharp exchange-rate moves can alter the price of imported goods, change the value of overseas revenue, and affect returns on international investments held by funds.

For import-heavy businesses, a weaker Australian dollar can quickly raise input costs and squeeze margins unless prices are adjusted or exposures are hedged. Exporters face the reverse effect: a lower local currency can lift returns on overseas sales, though volatility can still complicate planning and budgeting.

Superannuation funds also have reason to watch currency moves closely because of their large offshore asset holdings. Foreign exchange shifts can materially affect portfolio valuations and member returns, particularly when funds hold global equities and other overseas assets without full hedging.

The report presents the quarterly measure as a regular reading of how market participants respond to these pressures. By publishing results every quarter, the bank aims to track whether businesses change their assumptions and hedging behaviour as geopolitical events, inflation expectations, and central bank decisions shift.

Selective Hedging

The split between importers, exporters, and businesses that do both points to a more nuanced approach than a single headline figure suggests. Importers appear to use hedging mainly to protect against rising costs, while exporters seem more selective, taking cover when exchange rates move in their favour.

The gap also underlines how operating models shape treasury decisions. A company with both inbound and outbound trade flows can often offset part of its risk naturally, reducing the need to hedge every exposure through derivatives or other financial contracts.

The material released does not provide a sector-by-sector breakdown, but the overall results indicate that foreign exchange management remains a central issue for Australian businesses with international links. That is especially relevant for firms in trade-exposed industries and institutional investors with sizeable offshore positions.

The inaugural reading also offers a snapshot of sentiment during a period marked by conflict and abrupt shifts in market expectations. Currency markets often react quickly to geopolitical shocks, and the barometer suggests many Australian organisations responded by maintaining or increasing the share of exposures covered by hedging.

The strongest numerical finding was the 86 per cent hedge ratio among exporters that hedge, compared with about 80 per cent for importers and around two-thirds for businesses with both import and export exposure.