Information on Australian foreign currency exposure and the hedging activity undertaken to mitigate the risk associated with this exposure
As at March 31 2026:
The level of foreign currency denominated asset hedging was $1,253.3b of $4,430.1b total assets at 31 March 2026, compared to $912.6b of $3,282.1b at 31 March 2022.
The level of foreign currency denominated debt liability hedging was $1,032.6b of $1,752.6b total debt liabilities at 31 March 2026, compared to $690.7b of $1,265.9b at 31 March 2022.
As at 31 March 2026, Australian resident enterprises had a net asset foreign currency exposure of $2,251.6b after taking account of hedging through the use of derivative contracts.
This is an increase of $579.0b (34.6%) from the revised 31 March 2022 exposure of $1,672.6b.
The foreign currency balance sheet exposure at 31 March 2026 was a net asset position of $2,669.7b, an increase of $652.2b on 31 March 2022.
Banks were the most active sector buying and selling foreign currency derivative contracts in exchange for Australian dollars.
Of the total principal value of foreign currency derivative contracts bought and sold in exchange for Australian dollars, banks represented:
Net foreign currency balance sheet exposure was $2,669.7b at the total level, with $1,085.7b for the United States dollar.
Loans accounted for $589.5b of the total foreign currency denominated debt assets of $1,524.4b. Long term debt securities accounted for $503.3b.
Long-term debt securities accounted for $686.3b of the total foreign currency denominated debt liabilities of $1,756.2b. Deposits accounted for $287.2b.
Total foreign currency denominated short-term debt security liabilities was $367.9b at 31 March 2026. Of this total, $249.8b was hedged, of which $158.4b was maturity matched.
Total foreign currency denominated long-term debt security liabilities was $686.3b at 31 March 2026. Of this total, $525.9b was hedged, of which $320.7b was maturity matched.
Formal responses and respondent discussions indicate that hedging strategies have changed little since 2022. While foreign currency exposures and hedging volumes have generally increased, respondents reported that their underlying policies and approaches remain largely unchanged. Risk management and minimising foreign exchange exposure continue to be the main objectives.
Foreign exchange exposure is typically managed centrally, with larger organisations more likely to hedge at a portfolio level rather than on a security-by-security basis. Respondents generally reported a low appetite for foreign exchange risk, particularly within the banking sector, and continue to hedge exposures close to transaction timing with limited warehousing of risk.
58.8% of foreign currency denominated liabilities are either fully or partially hedged by derivative contracts. Only 28.3% of foreign currency denominated assets are either fully or partially hedged.
| Total all currencies ($b) | |
|---|---|
| Foreign currency denominated assets (incl equity and debt assets) | $4,430.1 |
| Hedged (fully or partially by derivative) | $1,253.3 |
| All other (unhedged or hedged without derivative contract) | $3,177.6 |
| Foreign currency denominated liabilities | $1,756.2 |
| Hedged (fully or partially by derivative) | $1,032.6 |
| All other (unhedged or hedged without derivative contract) | $756.8 |
‘All other’ indicates either a strategy of no hedging, hedging conducted by non-resident parent entities or natural hedging against other holdings in the portfolio.
As can be observed in the above graph, of total debt liabilities, well over half were fully or partially hedged. In contrast, for total assets, the "all other" category is the more dominant of the two.
‘All other’ indicates either a strategy of no hedging, hedging conducted by non-resident parent entities or natural hedging against other holdings in the portfolio.
At the aggregate level, foreign currency payments from trade tend to be more conservatively hedged than receipts from trade.
| Total ($b) | |
|---|---|
| Total foreign currency receipts from trade | $ 598.4 |
| Hedged | $ 56.8 |
| All other | $ 542.8 |
| Total foreign currency payments from trade | $ 321.0 |
| Hedged | $ 102.1 |
| All other | $ 219.5 |
‘All other’ indicates either a strategy of no hedging, hedging conducted by non-resident parent entities or natural hedging against other holdings in the portfolio.
Expected foreign currency payments from trade are more likely to be hedged within the first year.
| Less than 1 year ($b) | Greater than 1 year but less than 4 years ($b) | |
|---|---|---|
| Hedging of foreign currency payments from trade | $ 152.8 | $ 169.0 |
| Hedged | $ 84.6 | $ 17.2 |
| All other | $ 68.1 | $ 151.5 |
’All other’ indicates either a strategy of no hedging, hedging conducted by non-resident parent entities or natural hedging against other holdings in the portfolio.
The following qualitative data refers to only those Australian resident enterprises that reported employing a hedging strategy as at 31 March 2026. Consequently, aggregate data in dollar terms may not align with comparative data items reported elsewhere in the publication.
The level of foreign currency risk Australian resident enterprises accept can be viewed in the amounts of equity, debt assets, debt liabilities, receipts and payments from trade, hedged, and unhedged. The amount partially hedged, and the percentage of the partial hedge, also provide an insight into the policies applied.
Total equity assets, usual or benchmark level of hedging, for all sectors, was $1,559.1b.
Total equity assets have the below percentage breakdown of hedging policies applied:
Total debt assets, usual or benchmark level of hedging, for all sectors, was $852.6b.
Total debt assets have the below percentage breakdown of hedging policies applied:
Total expected receipts from trade, usual or benchmark level of hedging, for all sectors, was $395.1b.
Total expected foreign receipts from trade have the below percentage breakdown of hedging policies applied:
Total, foreign currency debt liabilities, usual or benchmark level of hedging, for all sectors, was $1,408.3b.
Total foreign currency debt liabilities have the below percentage breakdown of hedging policies applied:
Total expected payments from trade, usual or benchmark level of hedging, for all sectors, was $151.2b.
Total expected foreign payments from trade have the below percentage breakdown of hedging policies applied:
There has been little change to the benchmark level of hedging over the last four years.
| Equity assets total all sectors % | Debt assets total all sectors % | Receipts from trade total all sectors % | Debt liabilities total all sectors % | Payments from trade total all sectors % | |
|---|---|---|---|---|---|
| Yes, increased | 3.6 | 2.9 | 2.3 | 1.9 | 2.5 |
| Yes, decreased | 2.3 | 1.2 | 2.6 | 1.4 | 2.5 |
| Unchanged | 27.5 | 37.5 | 31.8 | 48.5 | 38.4 |
| No set benchmark | 66.7 | 58.4 | 63.3 | 48.2 | 56.6 |