U.S. firms that transact globally have been shaken by a renewed spike in currency volatility driven by geopolitical tensions, tariff uncertainty and uneven monetary policy signals. CFOs and treasurers are now reassessing pricing, funding and hedging decisions as the U.S. dollar rebounds amid a flight to safety.

In uncertain times, global CFOs and treasurers can gain valuable lessons from past foreign exchange strategies.Below are three foreign exchange market do’s and don’ts that can inform current risk management and help finance leaders avoid kneejerk reactions to headlines or short-term market movements.

Don’t: Make hedging decisions that express a market view. This might work for investors, but can cause challenges for corporate finance teams. One example of this error was in 2003-2004, when a European automaker reduced its hedge ratio on U.S. dollar revenues from ~70% to ~30%, effectively expressing a view that the euro would not appreciate meaningfully. The euro then surged from near parity with the U.S. dollar to ~$1.25, materially eroding U.S. dollar-denominated revenues when translated back to euros.

Do: Ensure hedging decisions are guided by risk policy and a documented framework. CFOs and treasurers benefit from having a clear FX risk management or hedging policy in place that defines hedge objectives, ratios allowed and instruments for example, related to options, forwards, swaps. It’s critical to revisit this policy regularly, at least on an annual basis, to determine if it still meets the intended objectives — which should be to achieve greater earnings stability and/or greater certainty of financial results.

Don’t: Rely on a single instrument or structure, such as “we only use forwards, because they’re easy and we’ve had good success in the past” or “options are too expensive.” An example of this backfiring was when a manufacturer hesitated to use FX options in 2008 due to premium costs and earnings optics. Its continued forward-only hedging forced the firm to lock in deeply unfavorable rates during a period of euro strength. Later analysis showed options would have preserved downside protection while allowing upside participation.

Do: Match the instrument to the objective. If you don’t need flexibility or upside potential, set it and forget it with a forward. If you need to hedge, but need flexibility to, for instance, help improve margins on foreign denominated sales, consider options. Recently, several U.S.-based exporters have explored this approach. Rather than slowing hedge programs or reducing hedge ratios, finance teams are seeking policy flexibility to re-incorporate options alongside existing rolling and layering programs. The objective is not to express a market view, but to better align hedge structures.

Don’t: Hyper-focus on P&L versus the real economic risks. For example, worrying about big mark-to-market swings on derivatives, and choosing not to hedge. In one situation a few years ago, a company had long-dated U.S. dollar revenues and a European cost base. Its heavy reliance on forward contracts locked in unfavorable EUR/USD rates for years. Today, this conversation increasingly extends beyond the euro, as companies reassess net investment exposures in markets such as Canada, Singapore, and China, particularly as traditional carry benefits have diminished.

Do: Focus first on the reduction of risk to cashflows or earnings from the underlying exposures such as foreign revenues or expenses and equity in overseas assets. Treat gains or losses on the hedges themselves as secondary.

Right now, given the recent U.S. dollar strength, disciplined exporters who layered hedges are generally in a good position, with opportunities to monetize gains. Recently in our work with CFOs across industries, clients have considered restructuring existing hedges to take gains off the table, especially in cross-currency swaps and FX forwards, and are evaluating payment currency strategies.

Global firms can also consider adjustments to the currency of payments with vendors, as crises often prompt discussions about switching between foreign currency and U.S. dollars. In addition, CFOs can leverage historical data and analytics to help with scenario analysis and back-testing.

Looking ahead, should the heightened volatility persist, it’s important to remember that disciplined FX risk management matters more than market forecasts. Rather than trying to predict direction, CFOs can focus on what is observable, including cash flow certainty, liquidity needs, and balance sheet exposure, and optimize hedge economics through the right mix of forwards, options, and structures. The goal is not to forecast currency movements, but to reduce volatility to cashflows and/or earnings when it matters most.