Currency hedge ratio falls to 41%, lowest since 2015 as investors leave 59% unhedged

The exposure-weighted average currency hedge ratio across six major markets (Japan, Canada, Taiwan, etc.) fell to 41%, the lowest since at least 2015. That means 59% of investor exposure to US assets is unhedged. This decline comes even as hedging costs have dropped sharply: 3-month USD hedge costs for Yen-based investors fell to 2.75% (from 6% in October 2023) and for Euro-based investors to 1.32% (2-year low). Investors have reduced hedges due to the US Dollar's historical resilience during volatility, but the case for remaining unhedged is weakening as hedging becomes cheaper and concerns over dollar debasement grow. The large unhedged position leaves trillions in US assets exposed to a weaker dollar.