Hedge clip­ping Cur­rency mar­kets hit aero­space gi­ant

The Daily Telegraph - Business - - Business -

Al­most half of Rolls’s re­ported loss stemmed from a £2.6bn hit from a re-eval­u­a­tion of its hedg­ing con­tracts.

Rolls uses its hedge book to pro­tect it­self against cur­rency fluc­tu­a­tions in the aero­space in­dus­try, where deals are done in US dol­lars.

It cut its hedge book against its dol­lar-based in­come by $10.3bn to $26.2bn over the next seven years “to re­flect the de­te­ri­o­ra­tion out­look caused by Covid-19”.

This re­sulted in a £1.46bn un­der­ly­ing hit for the half-year.

Rolls warned there might be more to come, if there is “fur­ther mar­ket de­te­ri­o­ra­tion com­pared to our re­cov­ery ex­pec­ta­tions”.

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