US businesses use option strategies to shield euro revenues from rising dollar

The euro rose against the dollar after the US imposed steep tariffs on imports from key trade partners in April. This pushed the greenback to a 3-year low and sparked trader concerns about American GDP growth, Reuters reports.

However, the delayed tariffs and positive economic data helped US stocks rebound 26% from April’s lows.

The options market shows investor expectations for currency movements. Right now, signals suggest fading confidence in further dollar weakness. Some companies are buying up euro put options that will appreciate if the euro weakens, to hedge against a potential decline in the European currency, according to the news agency.

A weaker euro could hurt US firms' profits when converting overseas earnings at unfavorable exchange rates.

According to Reuters, the euro is currently trading around $1.16. Analysts expect its upside to be capped at $1.18–1.20.