Cross-border investors reduced unhedged U.S. asset exposure post-Fed, driving dollar selling against GBP, EUR, and CAD.
Cross-border investors are rebuilding USD hedges following the July Fed meeting, reducing effective unhedged exposure to U.S. assets. The shift marks a peak in dollar dehedging rather than a decline in long-term demand for U.S. assets, according to market data.
A BNY indicator showed net U.S. asset exposure fell from 0.47 to 0.34 between July 29 and August 5, a sharp drop from near 15% excess hedge levels earlier. The move highlights investor sensitivity to Fed policy shifts, though underlying demand for U.S. assets remains solid.
Dollar selling pressure is concentrated against GBP, EUR, and CAD, while JPY and CNY remain exceptions. The Fed’s outlook continues to influence hedging levels, with market reactions suggesting heightened sensitivity to monetary policy signals.