Key takeaways
- A stronger CAD means each US dollar you earn buys fewer Canadian dollars.
- Forward contracts lock today’s rate for a future date.
- Options set a worst-case rate but keep the upside, for an upfront premium.
- Natural hedging means paying USD costs straight from USD revenue.
Why USD revenue is exposed
When you sell in US dollars and pay salaries, rent or suppliers in Canadian dollars, every move in USD/CAD changes what your sales are worth. On 14 October 2026 the Bank of Canada USD/CAD rate was 1.4263; by 27 October it was 1.4038. On US$100,000 of revenue, that move alone was worth C$2,250 less.
Three ways to hedge
| Method | What it does | Best when |
|---|---|---|
| Forward contract | Locks today’s rate for a set future date | You know the amount and timing |
| Option | Sets a worst-case rate, keeps the upside | Amounts or timing are less certain |
| Natural hedging | Pays USD costs from USD revenue | You have USD expenses too |
How a forward contract works
You agree a rate today with a provider for a conversion on a future date. If the Canadian dollar strengthens before then, you still convert at the agreed rate. The trade-off is that you also give up any gain if the rate moves in your favour. Forward rates include the provider’s pricing and an adjustment for the interest-rate difference between the two currencies.
When natural hedging is enough
If you already pay some costs in US dollars, such as software, contractors or US suppliers, holding a USD account and paying those costs directly avoids converting twice. Only the surplus needs converting, which shrinks the amount you need to hedge.
A simple hedging routine
- List the USD you expect to receive over the next 3–6 months.
- Decide how much you can afford to see fall in value, for example 2%.
- Hedge a share of the expected amount, often half, with forwards.
- Review each month as invoices are paid and new sales come in.
Providers that can help
Forwards, options and limit orders
Forward contracts for up to 12 months
Hold USD and pay USD costs directly
FAQs
What does it mean to hedge USD revenue?
It means protecting the Canadian-dollar value of money you earn in US dollars, so a stronger Canadian dollar doesn’t eat into your margins. Common tools are forward contracts, options and natural hedging.
Do small businesses use forward contracts?
Yes. Many FX providers offer forward contracts to small and mid-sized businesses, often from modest amounts. Corpay and OFX both offer forwards, with OFX offering them for up to 12 months.
Is a forward contract the same as an option?
No. A forward locks a rate in both directions, so you’re protected but give up any gain. An option sets a worst-case rate while keeping the upside, and costs an upfront premium.
How much of my USD revenue should I hedge?
There’s no single answer. Many businesses hedge part of what they expect to receive, often around half, so they’re protected without locking everything in. It depends on your margins and how predictable your sales are.
Sources: Bank of Canada daily exchange rates; Corpay and OFX published product information.