Hua Er Jie Jian Wen·2025-09-20 08:45Group 1 - A significant strategy in global capital markets is emerging, termed "hedging the dollar," with international funds flowing into the US while a potential $1 trillion shorting wave against the dollar is developing [1][4] - Major banks like State Street, Deutsche Bank, and BNP Paribas predict that this hedging trend will significantly pressure the dollar's performance in the coming year [1][4] - Deutsche Bank noted that since mid-2023, inflows into "dollar-hedged" US asset ETFs have surpassed "non-dollar-hedged" funds for the first time in a decade, indicating an unprecedented speed of this shift [1] Group 2 - The estimated scale of the hedging wave is around $1 trillion, which would restore the hedging ratio of global investors holding over $30 trillion in US stocks and bonds to the average level of the past decade [4] - The dollar's strength has been challenged, particularly after the Trump administration's tariff policies in April, which led to a sell-off in US stocks and bonds, contributing to the dollar's decline [6] - Analysts suggest that if the market speculates that the Federal Reserve is pressured by the White House to lower rates, the logical approach would be to favor US stocks and bonds while disfavoring the dollar [7] Group 3 - The most common hedging method among overseas investors is selling dollar forward contracts to lock in exchange rates, which translates into selling pressure on the dollar in the spot market [5] - As of April, the hedging ratio for foreign investors holding US assets stabilized around 56%, down from approximately 70% in mid-2023, indicating a significant shift in hedging behavior [8] - A recent survey by Bank of America revealed that 38% of global fund managers are seeking to increase currency hedging to address dollar weakness, marking the highest level since June [8]