2014 Forex Hedging

A recent article in CFO argues that companies should consider hedging currency risk in 2014. The reason for the increased need for hedging is a possible volatile year in currencies. For the past several years, monetary policies across the globe were in relative synch, with growth a key goal. In the U.S., quantitative easing may be coming to an end, while policies in other countries such as the euro area and Japan are expected to remain relatively unchanged. This divergence in economic policies could lead to more volatility in exchange rates during 2014. During the first six months of 2013, a relatively stable exchange rate regime, U.S. companies lost about $7.7 billion due to currency fluctuations.