Hedge cover
What is hedge cover, and how much should an exporter have?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
Hedge cover is the share of expected foreign-currency receipts already sold forward at an agreed rate, usually expressed in months of cover ahead. A lender reads its level, its trend, and whether it follows a written policy or the owner's view of the exchange rate — cover that has quietly shortened is a business taking more currency risk without deciding to. Where the risk is material, the bank may write a minimum hedge-cover covenant into the facility, so that the protection cannot lapse unnoticed.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
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