The Macro Trading Floor

Trillions of US Dollars To Sell?!

33 snips
Apr 25, 2025
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INSIGHT

Massive USD Under-Hedging Risks

  • Large institutional investors own over $33 trillion in USD assets but have systematically under-hedged their USD exposure for 15 years.
  • A small increase in hedge ratios could trigger trillions in USD selling flows, affecting FX markets significantly.
INSIGHT

Steady Hands Selling USD

  • Data shows consistent, steady selling of the dollar by foreign investors, especially during Asian trading hours.
  • This selling is a programmatic FX hedging activity and not driven by daily news or price levels.
ADVICE

Adjust FX Hedge Ratios Carefully

  • Institutional investors should consider modestly increasing their FX hedge ratios to manage risks more effectively.
  • Even a 3% increase in hedge ratios on $32 trillion of US assets can trigger significant market moves.
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