Currency hedging meaning

In this issue: Arbitration in England & Wales International arbitration Institutional and ad hoc arbitration Other arbitration and ADR-related news and developments Daily and weekly news alerts New and updated content Useful information Arbitration in England & Wales Supreme Court upholds costs award in sterling The UK Supreme Court has unanimously rejected Process & Industrial Developments Ltd’s (P&ID) challenge to a costs order made in favour of the Federal Republic of Nigeria (Nigeria). It confirmed that the Commercial Court and the Court of Appeal were right to make the order in sterling rather than Nigeria’s national currency, the naira. The justices held that costs orders are discretionary, not compensatory like damages, and that it was proper to frame the order in the currency in which Nigeria incurred and settled its legal expenses. The court identified no legal error in the decisions below and remarked that currency movements did not produce any ‘windfall’ for Nigeria. Duarte G....

Isio, a pensions consultant, said the idea of the dollar as a safe-haven asset in times of market turmoil could be over. The US dollar currency has fallen markedly in value since President Donald Trump unveiled his 'Liberation Day' tariff regime back on 2 April 2025. Roughly US$2.5trn was wiped from Wall Street in trading during the next session alone. Unhedged exposure to the US had been truly something overseas investors could depend upon as a safety blanket, but now, for the...

Conway and others (in their capacity as Joint Special Administrators of Argentex LLP (In Special Administration)) v Plass and others [2025] EWHC 2625 (Ch) What was the background? The matter related to directions requested by the Joint Special Administrators (JAs) of Argentex LLP (Argentex), after the firm entered special administration on 21 July 2025. By an application notice dated 12 August 2025, the JAs invited the court to give directions pursuant to paragraph 63 of Schedule B1 to the Insolvency Act 1986, as applied by the Payment and Electronic Money Institution Insolvency Regulations 2021 (the 2021 Regulations), SI 2021/716, regulation 37. Argentex’s core business comprised payment services alongside currency conversion, and it was authorised by the Financial Conduct Authority (FCA) both as an Electronic Money Institution under the Electronic Money Regulations 2011 and as a MiFID investment firm under Part 4A of the Financial Services and Markets Act 2000. The company offered customers spot, forward and option foreign exchange contracts, but it lacked the capital and authorisation to...

The most common reasons for entering into derivatives are for the purposes of: Speculation — when a party seeks exposure to a given variable, for example taking a view on a commodity’s future price on the assumption it will rise or fall over a chosen period Hedging — aiming to offset exposure to the risk of an unfavourable shift in a variable, or to stabilise expected outcomes over time Arbitrage — seeking to take advantage of price discrepancies (between markets, or within the same market over time) to earn profit or cut costs, or where one participant can reach a price or market unavailable to another, including where prices differ over time Exposure to asset classes — obtaining access to a target market (eg commodities, shares, property) without incurring the expense, complexity and formalities associated with those markets, avoiding the same costs and complications Derivatives are commonly used alongside lending arrangements for hedging purposes in practice. In this context, the primary...

Real estate finance (REF) transactions REF deals fall into two categories: investment finance and development finance. The difference depends on whether the property is bought as an investment that already produces income, or acquired with the intention that it will be developed. Investment finance transactions are encountered more frequently than development finance transactions. For a general introduction to investment facilities in real estate finance, see the following Practice Notes: Introduction to real estate finance—the lending structure Real estate finance—investment facilities—key features The Loan Market Association (LMA) has issued a recommended form of facility agreement for real estate finance investment transactions, accompanied by a user guide. Both are available to LMA members—see the Single Currency Term Facility Agreement for Real Estate Finance Multi-property Investment Transactions (LMA REF Investment Facility Agreement) and the related user guide on the LMA website. Real estate finance transactions can differ markedly, and the LMA acknowledges in its user guide that producing a genuine ‘standard form’ document for...

STOP PRESS ISDA and EMTA, the trade association for emerging markets, have jointly unveiled an updated set of standard definitions for foreign exchange (FX) derivatives transactions, refreshing key market practices and merging a range of FX and FX-related templates and provisions into a single, unified compendium. The 2026 FX Definitions will come into force on 22 November 2027, supplanting the 1998 FX and Currency Option Definitions as the market benchmark for FX derivatives transactions. From that implementation date, the global financial messaging provider, Swift, is not expected to continue supporting the 1998 definitions. The 2026 FX Definitions are available here. What does this Practice Note cover? This Practice Note offers an overview of foreign exchange (FX) derivatives and how they support currency hedging. It reviews the main categories of FX derivatives-such as FX forwards, FX swaps and FX options-describing their applications and contrasting deliverable and non-deliverable instruments. It also sets out the documentation frameworks widely used in FX derivatives markets, including: International Foreign Exchange...