Finland uses currency hedging in purchase of F-35 fighters

The State Treasury has used currency hedging in the purchase of F-35 fighter jets by the Finnish Defence Forces, said the Ministry of Finance in a press release on Tuesday.

The foreign currency forward contracts concluded on behalf of the state aim to limit currency risk associated with the investment.

These contracts fix the price of the currency in advance, providing predictability and financial security for the investment.

In its plenary session in December 2021, the Finnish Government made the decision to acquire 64 multi-role fighters from the American company Lockheed Martin.

In addition to the F-35 fighter jets, the significant investment includes weapons, software, supplies and services. All purchases were agreed to be paid in US dollars.

In December 2021, the Ministerial Committee on Economic Policy decided to hedge half of the about EUR 10 billion procurement against the risk of exchange rate fluctuations.

The State Treasury implemented the hedging with foreign currency forward contracts, which lock in the exchange rate for a currency transaction on a future date. The State Treasury executed the currency forward contracts between February 2023 and February 2024.

The contracts are related to the management of currency risks for payments scheduled between 2024 and 2030. Based on the currency forward contracts, the market expects the euro to strengthen from its current level in the coming years. The average exchange rate for the currency forward contracts entered into is EUR 1 = USD 1,1256.