Analysis-Foreign investors increase dollar hedges on US stock portfolios

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Written by Laura Matthews

New York (Reuters) -Racing asset managers and pensions add protection against the weakness of the dollar, who are interested in reducing the ability of the American currency to diversify the American stock governor.

Since these stock boxes have a built -in exposure to the dollar, investors with other home currencies did not deviate the risk of foreign exchange were expanded when the dollar was strong if Wall Street’s performance was bad.

But the dollar’s connection to other American assets, and the impact of its fall on the performance of the wallet, was more clearly focused when the Trump administration announced the global long -term definitions on April 2, which resulted in the sending of stock indexes in the United States and Greenback sharply. The dollar has achieved its lowest level for a period of three years against a basket of currencies, which raised the risks of investors whose portfolios have once benefited from normal hedge.

Now, managers reduce exposure to the dollar and increase the hedge rates to the American stock governor, as customer investment policies allow them to do so.

Van Le Lu, the global head of stretching solutions for fixed income in the international portfolios in the governor of international stocks, said about 10 % of the Rusell Investments in Europe and the United Kingdom have already increased hedging rates in their international governorates.

A customer raised it to 75 % of 50 %, with a highlight of the desire to obtain a larger part of the American stocks protected against the weak dollar.

“If what we see … you will have more customers take action in this direction,” said Luo.

“More hostile”

The dollar has decreased by 10 % for this year, and 6.5 % since the liberation day called US president Donald Trump in April. Meanwhile, the American stock index has regained the S&P 500, 24 % since it decreased in April and rose 5.3 % this year, with a standard level.

The MSCI Global Stock scale, minus the United States, increased by 16 % for this year.

“It is not enough to look at the stock market and say that it is somewhat back to where it was, so nothing happened,” said Peter Vasalo, FX port manager at BNP Paribas Asset Management, who runs the currency exposure through the class of assets.

BNP reduces the exposure of the dollar to its customers, which include pension funds, sovereign wealth boxes and central banks.

He sold US dollars through the stock governor and fixed income portfolios, and building what Vasalo described as a great position on money options that allow these strategies.

He said that the euro, the yen and the Australian dollar are among the initial currencies that it bought against the dollar, and it is a great variation with how the asset manager ended in the previous year with the small “weight gain” in US dollars.

“This shift towards a more mysterious policy system created an environment, as we, as participants in the market, see that the United States is more hostile to international capital flows, international trading,” Vasalo said.

After the June review, Justin Onokusi, the chief investment official in St. James Pliss, said it maintains a strategic hedge that allows it to reduce the exposure of the currency abroad for the pound by up to 20 %.

He said that the strategy “was useful for our public customers’ revenues so far.” Onuekwusi said he now sees that the dollar is closer to its fair value in the long run, and it has decreased marginally in the dollar through the managed governor.

Foreign investors have more than $ 30 trillion in US securities, about $ 17 trillion in stocks and more than $ 12 trillion of long -term debts, according to data published by the US Treasury in April.

Marcus Fernandez, global head of currency management at Northern Trust, said the difference in risk connection is more than in the past.

“For this reason, people think faster than before,” I need to increase my hedging rate. “

Cost incentive

Data from Russell showed that a limited version of the euro of the MSCI USA index was flat for this year until May, while the euro -euro’s unbeatable version decreased by 8.3 %, indicating the benefit of hedging for investors in the euro.

The dollar fell 13 % against the euro about concerns about the policies and growth of American trade.

“FX has returned to the agenda of the Board of Directors,” said Joe Makina, President of Fund Solutions in Milltech, London -based FX. “What was once dealt with in the rear office attracts the attention of the director of information and financial managers, driven by the renewal of dollar fluctuations.”

Managers have hedgested by the currency by selling the dollar against their base currency such as the euro or the pound in the FX Forwards market, as well as the use of derivatives such as options. When the dollar is weakened, it is gained in hedging the value while losing exposure to the dollar on the basic stock wallet.

The sale of the dollar is the largest in four years, according to John Willis, a Macro’s strategist in BNY Markets, indicating that investors are not ready to carry long exposure to dollars, even with the possibility of mobilizing if the US tariff policy changes or resumes Israel’s conflict of Iran.

He told Reuters that investors returning to the US assets to meet the standard weights after the sale of April are now turning these exposure.

“He continues until the dollar fluctuates is a source of concern,” Fils said. “Politics fluctuations as well as the fluctuations of the macroeconomic economy can cause people … Do not maintain the exposure of the dollar due to fears of the decline in the dollar.”

(I participated in the reports of Laura Matthews in New York; he participated in additional reports from Dara Ranasing in London; edited by Alden Bentley and Bill Berkerut)

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2025-07-01 19:58:00

0 4 minutes read