PODCAST | Rethinking FX in the era of volatility

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As sudden swings, geopolitical shifts, and the erosion of dollar-dominance reshape the market, foreign exchange (FX) — the global market for trading currencies — has become a central concern for businesses trading across borders.

In a recent episode of Trade Finance Global’s (TFG) podcast series Trade Finance Talks, Charles Osborne spoke with Trevor Charsley, Chief Technical Strategist at Corpay, and Chris King, Senior FX Dealer at Corpay. Their conversation unpacked why volatility is rising, how it is disrupting corporate planning, and what businesses can do to take control of their FX risk rather than react to it.

In April 2025, the Bank for International Settlements reported that FX trading reached $9.6 trillion per day – a 28% jump from just three years earlier. This surge, perhaps reflecting a period of recovery from the global pandemic and increasing digitalisation of global payments, has accelerated the speed, scale and complexity of currency markets. But rising volume is only part of the story: much of today’s volatility is driven by geopolitical shifts.

FX volatility: here to stay

“The world is getting used to the new United States administration and the difference in its behaviour,” said Charsley. “That means there has been increased uncertainty around the US, their trade policies, and what their aims are. This has produced additional currency volatility and risk for many businesses .”

The United States Supreme Court recently cast serious doubt on the legality of the tariff policies under the International Emergency Economic Powers Act (IEEPA), creating further uncertainty over global trade rules. The Supreme Court heard the case in early November, but it’s not yet clear when it will make a final ruling. 

Charsley recalled a chance encounter with a former World Trade Organization lawyer who believed that the Supreme Court challenge “could actually be successful and the tariffs could be struck down.”

According to Charsley, this could result in the government replacing them with new tariffs, possibly leading to months of uncertainty while US importers demand billions of dollars’ worth of refunds. Markets would likely see this as political and fiscal instability, which could weaken the US dollar, as The Economist argued in a recent leader.  

Trade policy isn’t the only source of turbulence. Monetary policy is also in transition. Charsley noted that Donald Trump is expected to announce a new Federal Reserve chair later this year, ahead of Jerome Powell’s term ending in May 2026.

“Whichever candidate they choose will possibly have a dovish look on interest rates,” he said, noting that markets expect the incoming chair to favour easier policy. This matters for FX because interest-rate decisions have a direct impact on the dollar: a more dovish chair is likely to support lower rates to bolster economic activity, even though rate cuts would typically weaken the currency.

Even beyond tariffs and monetary policy, markets are navigating another layer of instability: the recent 43-day US federal government shutdown, which ended November 11 2025. The disruption has delayed the release of key economic data, without which markets operate in the dark, not knowing the health of the economy, the job market, and the future of inflation.

For FX markets, these overlapping sources of concern point to the potential for sharper and less predictable moves in the US dollar. When trade rules are unsettled, interest-rate policy is up in the air, and data is absent, investors lack a solid outlook of where the economy is heading. As a result, currencies tend to react more erratically.

This turbulent landscape has made it extremely difficult for corporates to forecast cash flows, moving FX risk to the frontline of corporate planning.

Hedging under pressure

For many corporates, currency volatility can cause a direct hit to margins. Commodity trading, in particular, can operate on naturally thin profit margins — leaving little room for unexpected movements in FX.

King pointed to the recent 10.7% drop in the dollar: “From an FX perspective, [the drop] has cannibalised people’s returns,” he said, emphasising the impact on clients in commodity trading who have USD exposures. 

But the pressure doesn’t stop at profit. FX volatility can also affect working capital. When exchange rates move unpredictably, the impact may be that companies are forced to hold larger cash buffers to protect against potential losses, tying up liquidity that could otherwise be used for inventory, investment, or growth.

This is where hedging becomes crucial. It allows a company to fix or stabilise future exchange rates, so as to reduce the risk that unexpected market moves may erode margins or disrupt cash-flow planning. Essentially, hedging aims to reduce uncertainty by turning FX risk into a known, manageable cost.

“By hedging, a company gets visibility over its costs months in advance,” said King. “Hedge ratios are key here. It’s about deciding what proportion of exposure to hedge.”

Companies typically hedge a larger share of their near-term exposure — where payment schedules and demand are clearer — and reduce the hedge ratio further out, where seasonality can create more uncertainty.

The challenge, however, isn’t just knowing what to hedge, but being able to hedge at all.

Many corporates simply can’t easily access traditional hedging facilities because banks tend to require significant cash deposits and margin calls. For businesses already under pressure, hedging can be unaffordable.

“Working with an FX broker that has a large balance sheet, like Corpay, you can potentially waive initial margin and margin calls, which then shifts the focus from ‘Can we afford to hedge?’ to ‘What’s the right hedge ratio?’” King explained.

But even with access to hedging, another challenge emerges: many firms need solutions tailored to their specific exposures, not the generic, off-the-shelf products banks often provide. This is where bespoke hedging can make a real difference — allowing companies to combine instruments and build strategies that align with their cash-flow cycles and risk appetite.

A multipolar currency world

De-dollarisation is also adding a layer of complexity. As more trade is settled in currencies like the renminbi, real, and rupee, corporates increasingly operate across multiple currency blocs.

“The world is becoming a multipolar world,” said Charsley. “When you look at trade being denominated in Chinese currency, it means hedging becomes more and more important.”

He also highlighted how the dollar used to be seen as a safe bet, creating little incentive to hedge. The rise of multiple currencies and the recent volatility of the dollar have made hedging even more crucial.

This shift also makes exploring counterparty diversification essential. Many firms no longer want a single bank controlling their entire FX risk; working with multiple providers gives them more resilience when volatility spikes.

“It’s Treasury 101: diversify your counterparty risk,” said King. He stressed that brokers don’t replace banks, but complement them — offering speed, flexibility, and the ability to act quickly when a large contract or sudden exposure arrives.

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Both agreed that the FX landscape is unlikely to settle anytime soon, making for the possibility of a turbulent next few years.

“I think we are going to see this sort of volatility continue. I don’t think the US administration is going to change from its path. I think there are going to be various legal reckonings and challenges,” said Charsley. “The world is changing, and that may well continue for the next three to five years — and that’s going to impact the dollar and other currencies.”

King added that a broader hesitation is shaping global trade decisions. “There’s probably a de-globalisation sort of theme,” he said. “Most of the world is afraid to take the leap to do global trade at the moment because they are waiting to see what happens in the US.”

What is striking is that despite the rise of alternative currencies and the shakiness of the dollar, the United States remains integral in shaping both global trade and FX. Even as the world edges toward a more multipolar monetary system, the dollar — in its strength and its instability — continues to define corporate risk planning.

For businesses, FX volatility is an unwavering reality, demanding solutions such as strategic hedging, diversification, and built-in response mechanisms.