Deutsche Bank: Investors Are Reducing Dollar Exposure at a Record Pace

Jinse Finance reported that Deutsche Bank's analysis of ETFs shows that overseas investors are significantly reducing their US dollar exposure at an "unprecedented pace" when purchasing US stocks and bonds with currency hedging. George Saravelos, the bank's Global Head of FX Research, cited data from over 500 funds, noting that for the first time in a decade, the capital inflows into US dollar-hedged ETFs for US assets have surpassed those into non-hedged funds. According to Saravelos, this hedging behavior explains why the US dollar has remained weak even as international investors have returned to US assets after Trump's tariff policies disrupted markets earlier this year. At that time, the market speculated that trade war risks might dampen investor interest in US stocks, bonds, and the US dollar itself. Saravelos wrote: "The implication at the FX level is clear: foreign investors may have returned to the US asset market (albeit at a slower pace), but they do not want to take on the accompanying US dollar exposure. For every purchase of an asset hedged against US dollar risk, an equivalent amount of currency is sold to eliminate FX risk."