J. of Multi. Fin. Manag. 22 (2012) 151–167 Contents lists available at SciVerse ScienceDirect Journal of Multinational Financial Management journal homepage: www.elsevier.com/locate/econbase Exchange rate exposure and the use of foreign currency derivatives in the Australian resources sector Wing Hung Yip, Hoa Nguyen * School of Accounting, Economics and Finance, Faculty of Business and Law, Deakin University, 221 Burwood Highway, Burwood, VIC 3125, Australia a r t i c l e i n f o Article history: Received 15 August 2011 Accepted 22 June 2012 Available online 3 July 2012 JEL classification: G32 Keywords: Exchange rate exposure Foreign currency derivatives Australian resources firms Global financial crisis a b s t r a c t In this paper, we provide a re-examination of the exchange rate exposure and foreign currency derivative use by Australian resources firms in the 2006–2009 period which is characterized by increased volatility caused by the global financial crisis. In particu- lar, we consider the interaction of a resources firm’s exchange rate risk exposures, foreign currency derivative use and the global finan- cial crisis simultaneously. Conforming to expectations, our results indicate that more companies are significantly exposed to exchange rate risk since the onset of the financial crisis. However, there is a lack of evidence that the use of foreign currency derivative is more effective in alleviating exchange rate exposures during the crisis as opposed to the pre-crisis period. © 2012 Elsevier B.V. All rights reserved. 1. Introduction Exchange rate fluctuations have become a major source of risk to multinational corporations around the world since the collapse of the Bretton Woods system in the early 1970s. However, continuous innovations in financial markets and products have equipped corporations with a variety of tools to effectively manage their exchange rate (FX) exposures. As a matter of fact, exchange rate risk is one of the most widely hedged corporate risks. The popularity of foreign currency derivatives (FCD) as a hedging device provides an interesting reason for research that explores the relationship between FCD and FX exposure. Although not entirely unusual for empirical research, the existing evidence on the * Corresponding author. Tel.: +61 3 92446190; fax: +61 3 9244 6283. E-mail address: hoa.nguyen@deakin.edu.au (H. Nguyen). 1042-444X/$ – see front matter © 2012 Elsevier B.V. All rights reserved. http://dx.doi.org/10.1016/j.mulfin.2012.06.003