Deutsche Bank: Investors cut dollar exposure at record rate

Golden Finance reported that Deutsche Bank's analysis of ETFs shows that overseas investors hedging currency when buying U.S. stocks and bonds are significantly reducing U.S. dollar exposure at an unprecedented rate. George Salavelos, the bank's global head of foreign exchange research, quoted data from more than 500 funds, pointing out that this is the first time in this decade that the scale of funds inflows of US dollar hedging ETFs that purchase US assets exceeds that of non-held funds. In Salavelos's view, this hedging behavior explains why the dollar remains weak even as international investors once again poured their money into U.S. assets after Trump's tariffs disrupted the market earlier this year. At the time, the market had speculated that the risk of the trade war could weaken investors' interest in U.S. stocks, bonds, and the dollar itself. "The meaning of the foreign exchange level is clear: foreign investors may have returned to the U.S. asset market (although slowing down), but they do not want to bear the subsequent exposure to the dollar. For every asset hedging the risk of the dollar, an equal amount of currency is sold to eliminate the risk of the foreign exchange."