Global financial uncertainty has increased foreign exchange volatility, and with it the desire by M&A dealmakers to hedge their currency risk
Some hedging products that were used only sparsely for years are making a comeback now, driven by a surge in cross-border mergers and acquisitions to a record at a time of heightened currency volatility, bankers say. The deal frenzy, sparked by cheap financing and plentiful cash at companies, comes during unsettled times for global financial markets due to the prospect of higher U.S. interest rates and a sharp slowdown in China's economy. A JPMorgan FX volatility index which measures the implied swings of currencies is at its highest level in nearly two years, indicating markets expect currencies to remain volatile, according to foreign exchange traders. Demand for...hedging products used by M&A participants has grown by more than 50 percent over the past year, three top investment bankers said.