Philippines firms step up forex hedging as dollar stays strong

MANILA, Philippines — Philippine companies are taking a more disciplined approach to managing foreign exchange risks as a strong dollar, volatile oil prices and heightened geopolitical tensions cloud funding and investment decisions, according to Bank of America (BofA).

Vince Valdepeñas, Philippines country executive at BofA, said corporates have become more deliberate in managing their dollar requirements, with most companies choosing to layer their hedges rather than lock in all exposures at once.

“In a strong dollar environment, Philippine corporates are taking a disciplined and flexible approach to forex risk management,” Valdepeñas told The STAR in an email interview.

“Most are layering their hedges with a clear focus on near-term requirements, avoiding concentration by not locking in all exposures at once,” he said.

The peso has been under pressure from a strong dollar and concerns over higher global oil prices, which could add to inflationary pressures in the Philippines, a net oil importer.

A weaker peso makes imports more expensive and raises the cost of servicing dollar-denominated obligations.

Valdepeñas said companies with dollar needs are taking advantage of market dips, while dollar earners are using the volatility to secure better levels for future transactions.

“Overall, while volatility has reinforced a prudent stance, it has also led to more deliberate and thoughtful funding and hedging strategies, particularly for companies with significant dollar obligations or import exposure,” he added.

The more cautious approach comes as corporates and investors remain engaged in the bond and forex markets, although activity has become more selective after an initial pickup in trading when markets reacted to geopolitical developments.

Valdepeñas said participants are not fully staying on the sidelines, but are waiting for clearer signals before taking larger positions.

This has translated into stronger demand for risk management and liquidity solutions.

“As uncertainty rises, we are seeing increased client engagement across treasury and cash management, forex risk management and balance-sheet optimization, as corporates and investors focus on protecting liquidity, managing costs and positioning themselves for opportunities when conditions improve,” Valdepeñas said.

He said the bank’s message to clients is to remain optimistic but disciplined as market volatility continues.