"Corporates have been a little bit surprised by the behaviour of the dollar this year, but I don't think they have been goaded into changes of their hedging strategy," said John Rothfield, G10 currency strategist with Bank of America in San Francisco. In many cases, those strategies were last reviewed in the fourth quarter of 2004, he added.
Currency hedging plans are usually based on six-month or annual forecasts for the dollar. Based on these predictions, strategies may involve the use of forwards, contracts that allow a purchaser to buy a currency for delivery at a later date, and options, which give the buyer a right to buy or sell a currency at a fixed price within a certain timeframe.
"If you are long euro, and a lot of (US) corporations are that generate cash flow abroad...you are riding the euro up all the way," said Anil Agarwal, managing director with Brown Brothers Harriman in New York.
Agarwal's reckons that the euro's retreat from record highs against the dollar above $1.36 in December to around $1.30 now, is merely "a pause that refreshes" the euro. The dollar's long running decline will resume, as the wide US trade deficit weighs on the greenback once again, he expects.
It seems many US companies are operating on that premise.
During the last three years, as the euro has gained about 50 percent against the dollar, those US companies with a big slice of revenues from Europe have reaped robust returns from the declining dollar.
US exporters' decisions on which rates to lock in as they hedge against currency risk depends partly on whether they think the dollar will fall further.