Group 1 - A new strategy called "hedging the dollar" is gaining traction in global capital markets, with international funds flowing into the US while a potential $1 trillion shorting wave against the dollar is brewing [1][5] - Major Wall Street banks, including State Street, Deutsche Bank, and BNP Paribas, predict that this hedging wave will significantly pressure the dollar's performance in the coming year [2][8] - The shift towards "dollar-hedged" US asset ETFs has seen inflows surpass "non-dollar-hedged" funds for the first time in a decade, indicating a historic change in investor behavior [2] 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 [5][6] - The traditional view of the dollar as a safe haven during crises has been challenged, particularly after the Trump administration's punitive tariffs led to a sell-off in US stocks and bonds, contributing to the dollar's decline [9][10] - Current foreign holdings of US assets amount to approximately $20 trillion in stocks and $14 trillion in bonds, with a noted decrease in hedging ratios for both fixed income and equities in recent years [11] Group 3 - The trend of increasing hedging is evident, with a recent survey indicating that 38% of global fund managers are seeking to increase currency hedging to counter a weakening dollar, the highest level since June [12] - Some large investors, including pension funds from Canada, Europe, and Australia, have signaled intentions to increase their holdings, reflecting a broader shift in investment strategies [12] - Individual fund managers are also adapting, with some establishing hedging positions early in the year based on expectations of a weaker dollar, while others remain cautious about increasing hedging in the current environment [12]

Core Viewpoint - A significant strategy known as "hedging against the US" is emerging in global capital markets, characterized by a massive influx of international funds into the US while simultaneously a potential trillion-dollar wave of shorting the dollar is brewing [1][2]. Group 1: Market Dynamics - Major Wall Street banks, including State Street, Deutsche Bank, and BNP Paribas, predict that the ongoing hedging activities will significantly pressure the dollar's performance in the coming year [2][8]. - Deutsche Bank noted that since mid-year, inflows into "dollar-hedged" US asset ETFs have surpassed those into "non-dollar-hedged" funds for the first time in a decade, indicating an unprecedented speed of this shift [2][8]. Group 2: Scale of Hedging - The potential scale of this hedging wave is estimated at approximately $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 [5][6]. Group 3: Investor Behavior - Foreign investors currently hold about $20 trillion in US stocks and approximately $14 trillion in US bonds, with a noted decrease in their hedging ratios for fixed income and equities by about five and two percentage points, respectively, in recent years [11]. - A survey by Bank of America revealed that 38% of global fund managers are seeking to increase currency hedging to counter a weakening dollar, marking the highest level since June [13]. Group 4: Operational Strategies - One common hedging method employed by overseas investors is selling dollar forward contracts to lock in exchange rates, which typically translates into selling pressure on the dollar in the spot market [9]. - The current hedging ratio for foreign investors has stabilized around 56%, down from approximately 70% mid-year, indicating a strategic shift rather than a mass liquidation of US assets [11].

Core Viewpoint - A significant shift in investment strategies is occurring, with a surge in funds flowing into "dollar-hedged" U.S. asset ETFs, surpassing "non-dollar-hedged" funds for the first time in a decade, indicating a potential $1 trillion wave of dollar hedging that could restore the hedging ratio of global investors' $30 trillion in U.S. equities and bonds to the average level of the past decade [1][3][6][7]. Group 1: Market Dynamics - International capital is continuously flowing into the U.S., pushing the holdings of U.S. Treasuries to a historical high while also pursuing rebounds in U.S. equities [2]. - Major Wall Street banks, including State Street, Deutsche Bank, and BNP Paribas, predict that the ongoing hedging activities will significantly pressure the dollar's performance in the coming year [3][9]. - The current hedging trend is characterized as a precise and subtle strategy termed "hedging America," which is becoming mainstream in global capital markets [5]. Group 2: Investor Behavior - As of April, foreign investors' hedging ratio for U.S. assets has stabilized around 56%, down from approximately 70% in mid-2023, indicating a shift in risk management strategies [11]. - A survey by Bank of America revealed that 38% of global fund managers are seeking to increase currency hedging to mitigate the risks associated with a weakening dollar, marking the highest level since June [12]. - Some large investors, including pension funds from Canada, Europe, and Australia, have signaled intentions to increase their holdings, reflecting a broader trend towards enhanced hedging [12]. Group 3: Strategic Insights - The analysis from Ninety One's Sahil Mahtani suggests that a slight adjustment in the current hedging practices could lead to approximately $1 trillion in dollar-selling foreign exchange transactions [6][11]. - Eleva Capital's Stephane Deo has already established hedging positions early in the year, anticipating a weaker dollar due to government policies, which aligns with the expectation of rising U.S. equities [13].

Group 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]

Group 1 - The core viewpoint is that overseas asset management institutions and pension funds are accelerating the construction of a firewall against a weakening dollar to mitigate the dual impact of exchange rate fluctuations on U.S. stock portfolios [1] - The traditional logic that "when U.S. stocks fall, the dollar strengthens to provide a buffer" has been challenged, particularly after the dollar index dropped 6.5% to a three-year low due to the Trump administration's global tariff policy [1] - Russell Investments revealed that about 10% of asset portfolios among pension clients in Europe and the UK have increased their hedging ratio for international stock investments, with some aggressive investors raising their risk coverage from 50% to 75% [1] Group 2 - BNP Paribas Asset Management is systematically reducing its dollar exposure by selling dollars through both equity and fixed income portfolios while building long positions in euros, yen, and Australian dollars [2] - Different institutions have varying judgments on dollar valuation; for instance, St. James's Place Capital has maintained its GBP hedging cap while reducing dollar hedging, believing the current dollar exchange rate is close to its long-term fair value [2] - The increase in hedging demand is driven by the widening cracks in asset risk correlation, as noted by Northern Trust's global currency management head [2] Group 3 - Data shows that the euro-hedged version of the MSCI U.S. Index achieved zero returns over the past 12 months, while the unhedged version plummeted by 8.3%, coinciding with a 13% drop in the dollar against the euro [3] - The volume of dollar forward contract sales has reached a four-year high, indicating that investors are opting to "vote with their feet" despite potential dollar rebounds from tariff policy fluctuations or geopolitical conflicts [3] - Asset managers are using foreign exchange derivatives as a core weapon in this currency defense strategy, employing forward contracts and options to build risk barriers against dollar depreciation [3]