At Any Rate Global FX: Deep-dive into global FX hedge ratios
Jul 3, 2025
Ben Jarman, a strategist at JPMorgan based in Sydney, sheds light on Australia's pension system and its influence on FX hedge ratios. Patrick Locke, also a JPMorgan strategist, dives into Canadian pension funds and their FX hedging strategies. The discussion highlights how Australia's low FX hedge ratios affect currency flows, while Canada's approach adapts to market shifts. They also touch on European hedge ratios and the impact of UK fiscal news on sterling and US payrolls, revealing insights into international investment dynamics.
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Global USD Long via US Equities
- FX market participants should view positioning through the lens of U.S. equities rather than only narrow FX metrics.
- The world is structurally long the dollar via U.S. equities creating a significant positioning overhang.
Australia's Pension FX Hedge Impact
- Australia's large pension system heavily invests in international assets, especially US equities.
- Rising FX hedge ratios in Australia could support the Aussie dollar by reducing spot FX sell flow.
European FX Hedge Ratio Divergence
- European hedge ratios are mostly at decade lows except Sweden, which is unusually high.
- Sweden's foreign equity portfolio saw both rising hedge ratios and significant repatriation in recent years impacting its currency.