Overview
- Deutsche Bank estimates roughly 80% of recent foreign inflows to U.S. equities and about 50% to U.S. bonds are FX‑hedged.
- Hedged purchases require selling equivalent dollars, helping explain dollar weakness even as major U.S. stock indexes set records.
- Unhedged inflows are running about 75% below last year’s peak, and hedged flows now exceed unhedged for the first time this decade.
- Expectations of upcoming Federal Reserve rate cuts point to cheaper USD hedging, which could sustain the shift toward removing currency risk.
- A research note cautions that in a future credit squeeze the usual dollar buffer could be smaller because many foreign holdings lack unhedged exposure.