2025-04-21 05:16
Companies seek longer hedges due to uncertainty in tariff duration Higher volatility raises premiums for FX protection Euro strength sends some companies into options for flexibility NEW YORK, April 21 (Reuters) - U.S. multinational companies are extending their currency hedges to longer periods to shield their cash flows from potential exchange rate volatility triggered by the Trump administration's tariff policies. The change in duration reflects the heightened uncertainty for these multinationals in the rapidly changing global trading landscape, particularly amidst fears of a recession and a weakening dollar. Sign up here. A sharp jump in FX market gyrations following U.S. President Donald Trump's April 2 unveiling of higher-than-expected global tariffs left some of their hedges underwater, bankers and hedging advisors said. Even companies that weathered the surge in volatility relatively well have started to extend the duration of their hedges. "Over the past week, we've seen a group of clients push their hedges out to the maximum available tenor as they look to lock in protection and ride out near-term instability," said Eric Huttman, CEO of MillTechFX. Instead of hedging short-term risks, Garth Appelt, head of FX & emerging markets derivatives at Mizuho Americas, said his clients are now hedging two to five years out as dollar weakness has become one of the biggest fallouts of the tariff-related market turmoil. A weaker dollar can be good for U.S. exporters since it makes their products relatively cheaper abroad. But uncertainty about global trade and recession fears is prompting companies to take additional steps to guard future profits. A 90-day reprieve on some duties for all trading partners except China has done little to arrest the dollar's decline or to tame the heightened volatility in the foreign exchange markets. The dollar has weakened against major peers, with the euro hitting a three-year high against the greenback. Companies have another powerful reason to look further out for their hedges: higher volatility has driven up the cost of near-term hedging instruments. "Hedging farther out along the curve maintains the same level of protection against currency movements but without the need to crystallize profit and loss generated by short-term FX swings," said Simon Lack, head of investment solutions at MillTechFX. Volatility expectations embedded in one-month and three-month at-the-money options contracts rose 72% and 46%, respectively, since April 2, before slightly easing, according to LSEG data. That means companies must pay more to insure themselves against potential losses in the short term. Meanwhile, a two-year at-the-money EUR/USD options increased by just 23%. PIVOTING TO OPTIONS Trump's tariff shock has upended most market participants' assumptions on the outlook for the euro. While a stronger euro is generally beneficial for U.S. companies with sizeable sales in Europe since their foreign earnings convert to more U.S. dollars, it can also raise the cost of doing business for others. "We're seeing a lot more structures trying to protect anyone that needs to purchase euros for goods and materials," said Appelt. Paula Comings, head of FX sales at U.S. Bank, said euro strength caught some clients a bit wrong-footed. "There was tremendous focus on refining CAD (Canada) and MXN (Mexico) hedging strategies. Corporates have shifted attention now to better position themselves for a stronger euro," she said. Some businesses are exploring window forwards, which offer the benefits of forward contracts but with flexible execution time frames, particularly appealing for companies facing an uncertain cash flow environment. The appetite for other types of contracts that allow companies to buy or sell currencies at more attractive rates for a number of expiries without an upfront cost is also growing. Over the past two to four weeks, Comings said more of her clients have also been pivoting away from hedging with forwards towards options, for greater flexibility as trade tensions drag on. "There's some value in pursuing an option strategy. You don't have to decide today what tomorrow is going to look like," said Bob Stark, global head of enablement, at Kyriba. "It's always hard to predict tomorrow. But it's especially hard right now." https://www.reuters.com/business/us-multinationals-extend-currency-hedges-counter-trumps-tariff-volatility-2025-04-21/
2025-04-21 05:04
MUMBAI, April 21 (Reuters) - The Indian rupee and other Asian currencies strengthened on Monday as the dollar remained under pressure, with the latest drag coming from U.S. President Trump's criticism of Federal Reserve Chair Jerome Powell, fuelling concerns over central bank independence. The rupee touched a peak of 85.0525 in early trading before paring gains to last quote at 85.1125, up 0.3% on the day. Sign up here. Bids from two state-run banks slowed the rupee's gains on the day, prompting speculation that the Reserve Bank of India (RBI) was stepping in to absorb inflows. While two traders said that the RBI could be active, one said the dollar-buying could also be on behalf of importer clients. More broadly, persistent dollar weakness has made investors slightly more positive on Asian currencies. This shift in sentiment is also visible in the falling cost of hedging against rupee depreciation. The 1-month dollar-rupee forward premium has dropped to a year-to-date low of 15.50 paisa, while 1-month points in the non-deliverable forwards market have eased to near their 2025 lows. On the day, the dollar index hit an over three-year low of 98.2 as investor confidence in the U.S. economy took another hit over President Donald Trump's plans to shake up the Federal Reserve. Trump will study whether to fire Federal Reserve Chair Powell, a White House advisor said on Friday. "While we think it is unlikely the Trump administration will be able to remove the Fed Chair outright given the lack of legal authority, any moves on this front will likely create an outsized market move including in FX," MUFG Bank said in a note. Asian currencies were mostly stronger on the day with the Thai baht up nearly 0.7% and leading gains. https://www.reuters.com/world/india/rupee-jumps-hedging-costs-slide-dollar-keeps-taking-punches-2025-04-21/
2025-04-21 04:09
Brussels considers tweaks to how it applies EU methane rules Trump wants EU to buy more US gas, as part of trade talks US LNG firms warn methane rules a hindrance to this BRUSSELS, April 21 (Reuters) - The European Union is looking at ways to make it easier for U.S. gas exports to comply with its methane emissions rules, as the bloc attempts to avert a trade war with U.S. President Donald Trump, three sources familiar with the matter told Reuters. The European Commission is working on its offer for trade negotiations with the United States, to attempt to avoid Trump's planned tariffs - with both sides signalling that energy could form part of a broader trade deal. Sign up here. Trump has said several times the EU should buy more American oil and gas to lower its trade surplus with the United States. European Commission President Ursula von der Leyen has said the EU could increase U.S. LNG purchases, as the bloc seeks to quit Russian gas by 2027. As part of the energy options being explored to aid trade talks with the U.S., the Commission is looking at using flexibilities in how it applies EU methane rules, which could benefit U.S. LNG exporters, the sources said. The aim would be to avoid weakening the overall law, while introducing technical rules that could enable U.S. exporters to be deemed to be following "equivalent" methane rules to those of the EU, and therefore automatically comply with the EU law, they said. The sources did not provide details on how that could be accomplished. The move could be complicated by Trump's plan to scrap existing U.S. regulations requiring gas producers to report their methane emissions, making it harder for the EU to justify letting U.S. companies automatically comply. A European Commission spokesperson declined to comment on whether it was exploring possible flexibilities in the methane law that could benefit U.S. LNG exporters. "The Commission has an ongoing dialogue with industry on all relevant matters related to our legislation," the spokesperson said. Methane is a powerful greenhouse gas and the second-biggest cause of climate change after carbon dioxide emissions. Starting this year, the EU requires importers of oil and gas to Europe to monitor and report the methane emissions associated with those imports. The EU methane law could give U.S. LNG an advantage over gas from suppliers with a higher methane emissions intensity, such as Russia and Algeria. But U.S. exporters warn they will struggle to technically comply with the law, because the fragmented nature of the country's gas industry means they cannot track methane emissions along their value chains, since one LNG shipment may contain co-mingled sources of fuel from numerous gas fields. From 2027, the EU law will make compliance with methane rules equivalent to those of the EU a requirement for foreign suppliers to sign new contracts with European buyers. The European Commission held an online meeting last month with U.S. LNG companies to discuss their concerns about the law. The U.S. is already the EU's biggest supplier of LNG, having ramped up deliveries as Europe raced to replace Russian gas following Russia's 2022 invasion of Ukraine. The U.S. supplied 45% of the EU's LNG imports last year, which worked out at 16.5% of total EU gas and LNG imports. https://www.reuters.com/sustainability/climate-energy/eu-explores-tweaking-methane-rules-us-gas-help-trade-talks-sources-say-2025-04-21/
2025-04-21 03:50
BYRNIHAT, India, April 21 (Reuters) - Two-year-old Sumaiya Ansari, a resident of India's Byrnihat town which is ranked the world's most polluted metropolitan area by Swiss Group IQAir, was battling breathing problems for several days before she was hospitalised in March and given oxygen support. She is among many residents of the industrial town on the border of the northeastern Assam and Meghalaya states - otherwise known for their lush, natural beauty - inflicted by illnesses that doctors say are likely linked to high exposure to pollution. Sign up here. Byrnihat's annual average PM2.5 concentration in 2024 was 128.2 micrograms per cubic meter, according to IQAir, over 25 times the level recommended by the WHO. PM2.5 refers to particulate matter measuring 2.5 microns or less in diameter that can be carried into the lungs, causing deadly diseases and cardiac problems. "It was very scary, she was breathing like a fish," said Abdul Halim, Ansari's father, who brought her home from hospital after two days. According to government data, the number of respiratory infection cases in the region rose to 3,681 in 2024 from 2,082 in 2022. "Ninety percent of the patients we see daily come either with a cough or other respiratory issues," said Dr. J Marak of Byrnihat Primary Healthcare Centre. Residents say the toxic air also causes skin rashes and eye irritation, damages crops, and restricts routine tasks like drying laundry outdoors. "Everything is covered with dust or soot," said farmer Dildar Hussain. ritics say Byrnihat's situation reflects a broader trend of pollution plaguing not just India's cities, including the capital Delhi, but also its smaller towns as breakneck industrialisation erodes environmental safeguards. Unlike other parts of the country that face pollution every winter, however, Byrnihat's air quality remains poor through the year, government data indicates. Home to about 80 industries - many of them highly polluting - experts say the problem is exacerbated in the town by other factors like emissions from heavy vehicles, and its "bowl-shaped topography". "Sandwiched between the hilly terrain of Meghalaya and the plains of Assam, there is no room for pollutants to disperse," said Arup Kumar Misra, chairman of Assam's pollution control board. The town's location has also made a solution tougher, with the states shifting blame to each other, said a Meghalaya government official who did not want to be named. Since the release of IQAir's report in March, however, Assam and Meghalaya have agreed to form a joint committee and work together to combat Byrnihat's pollution. https://www.reuters.com/world/india/indians-battle-respiratory-issues-skin-rashes-worlds-most-polluted-town-2025-04-21/
2025-04-21 03:17
April 19 (Reuters) - China's privately controlled ENN Natural Gas (600803.SS) , opens new tab and state-run Zhenhua Oil have each signed a term deal to buy liquefied natural gas from Abu Dhabi National Oil Company (ADNOC). ENN Natural Gas said on its official WeChat account on Saturday that the deal covers annual supplies of about one million metric tons for 15 years, marking ADNOC's largest LNG contract with a Chinese buyer. Sign up here. "The deal marks a key step for ENN towards enhancing a stable energy supply chain and diversifying supplies," ENN said. Shanghai-listed ENN Natural Gas, which currently holds a 34.28% stake in Hong Kong-listed ENN Energy (2688.HK) , opens new tab, is proposing to buy out the rest of the clean energy distributor for roughly $7.65 billion. Separately, state oil and gas trader Zhenhua Oil agreed a 5-year deal with ADNOC starting in 2026 for up to 12 cargoes a year, said a Chinese industry source with direct knowledge of the agreement. Under Zhenhua's first long-term LNG contract, pricing is on a delivered basis into Rudong in east China's Jiangsu province, with some shipments benchmarked to the Japan Korea Marker and others to Brent oil, said the source, who declined to be named as he is not authorised to speak to the media. Zhenhua Oil, which already partners with ADNOC in Abu Dhabi, is building its first LNG terminal in Rudong, with commissioning expected in the first quarter of 2026. ADNOC CEO Sultan Al Jaber attended the opening of the company's new Beijing office on Friday, according to the industry source, who attended the ceremony, and a report by Dubai-based China-Arab TV. Without giving further details, the report said ADNOC signed three LNG supply deals with Chinese partners during Al Jaber's visit. Zhenhua Oil and ADNOC were not immediately available for comment over the weekend. https://www.reuters.com/sustainability/climate-energy/chinas-enn-zhenhua-oil-agree-lng-deals-with-adnoc-2025-04-21/
2025-04-21 02:57
MUMBAI, April 21 (Reuters) - The Indian rupee is likely to advance on Monday, tracking broad dollar weakness triggered by worries about the Federal Reserve's independence under U.S. President Donald Trump. The 1-month non-deliverable forward indicated that the rupee will open at 85.15-85.20 to the U.S. dollar compared with 85.3675 in the previous session. Sign up here. The rupee is not too far away from the recent high of 84.96 hit at the beginning of the month. "The key thing to watch today is whether it (USD/INR) breaks below 85 and holds there," said a currency trader at a bank. "If it (does), I expect exporters to step in quickly — especially considering how much pressure the dollar is under." The dollar weakened more against its major peers and slipped versus Asian currencies on Monday, with the dollar index falling to around 98.28 on concerns about the Fed's independence. The dollar index is now at its lowest in three years and has plunged 5.5% this month. White House economic adviser Kevin Hassett said on Friday that the administration was still exploring whether it had the authority to dismiss Fed Chair Jerome Powell, sparking unease over political interference in U.S. monetary policy. This came just a day after Trump said Powell's termination "cannot come fast enough", demanding that the Fed cut interest rates. While analysts believe an outright removal of the Fed Chair remains unlikely due to legal constraints, MUFG Bank warned that any further steps in that direction could trigger significant market volatility and should be monitored closely. The dollar had already been struggling prior to this due to investor concerns that President Trump’s aggressive tariff policies could dampen U.S. growth while stoking inflation. KEY INDICATORS: ** One-month non-deliverable rupee forward at 85.35; onshore one-month forward premium at 16.75 paise ** Dollar index down at 98.27 ** Brent crude futures down 1.8% at $66.8 per barrel ** Ten-year U.S. note yield at 4.34% ** As per NSDL data, foreign investors bought a net $470.1 million worth of Indian shares on Apr. 16 ** NSDL data shows foreign investors sold a net $174.1 million worth of Indian bonds on Apr. 16 https://www.reuters.com/world/india/rupee-rise-dollar-slide-sparked-by-fed-autonomy-concerns-2025-04-21/
