Behind the US Dollar Decline: Reduced Overseas Hedging by US Investors as a Catalyst

【Crypto World】Behind the recent decline of the US dollar, there is a detail that many people have overlooked. According to the head of global foreign exchange sales and trading at State Street Markets, a subsidiary of BNY Mellon, the real driver of the dollar’s depreciation in the first half of this year is not global investors rushing to increase their US asset holdings, but rather domestic US investors adjusting their strategies—they are reducing their foreign exchange hedging for overseas investments.

Does this sound counterintuitive? But the data speaks for itself. This executive revealed at the New York Federal Reserve’s foreign exchange market conference that US domestic investors have cut their hedging ratios in half. This large-scale hedging adjustment has directly put pressure on the dollar. He also mentioned that uncertainties brought by Liberation Day (possibly referring to a political or economic milestone) still exist, and discussions about de-risking have heated up accordingly. In simple terms, when US investors start pulling back from overseas deployments, the dollar naturally weakens.