Currency Risk Management: From Theory to Practice

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Currency Risk Management: From Theory to Practice

Deutsche Bank

Research

Foreign Exchange Date

FX Blog 23 June 2026

Currency Risk Management: From Theory to

Rohini Grover, Ph.D. Practice

Strategist

+44-20-754-75907

We recently highlighted growing interest among financial institutions in a more

integrated framework for managing risk, return and liquidity at the total-fund Vivek Anand

level. The challenge, often described as the total portfolio approach (TPA), is no Quantitative Strategist

+44-20-754-52789 longer whether TPA makes sense in theory, but how institutions can implement it

within their own governance structures, risk systems and organisational set-up.

Holistic currency risk management, a key pillar of this approach, is becoming a

more central part of the discussion. We recently published Dynamic FX Portfolio

Hedging: A deep dive and why you should use it and why and how to use a

currency signal on applying this principle to FX risk management. Since the

papers were published last month, we have discussed these ideas with more than

35 clients. Here, we summarise the main findings from our TPA study and recent

client conversations on implementing TPA in FX:

▪ Currency risk is often overlooked or managed in silos: Although this has

long been the norm, we are now seeing more interest in managing

currency risk more actively. Choosing not to hedge is itself a risk decision

and, if made passively, can affect portfolio outcomes. Across asset

classes, bond exposures are typically hedged more than equities, but

clients responded positively to the idea of managing FX exposures

centrally. Regionally, the upcoming Dutch pension reforms are also

prompting funds to take a more active approach to FX risk.