Williams says dollar weakness in 2025 reflected higher hedging ratios, not actual asset sales by foreigners.
“Anecdotal reports, supported by jurisdiction-specific measures, indicate that some foreign investors raised the hedge ratios on their U.S.”
Williams says fund managers increased FX hedge ratios on U.S. holdings during April dollar depreciation.
“Some global fund managers increased the FX hedge ratios of their U.S. asset holdings, particularly amid the notable dollar depreciation in April.”
Williams says increased hedging by foreign investors, not asset sales, drove 2025 dollar depreciation despite limited evidence of portfolio shifts.
“asset holdings from historically low levels—a factor that contributed to the dollar's depreciation, even as available data showed limited evidence of foreign investors actively selling U.S.”
Williams says recent evidence suggests hedging activity driving dollar weakness may have plateaued.
“Recent evidence suggests this hedging activity may have plateaued, but it reinforces the need for consistent engagement with market participants to better understand shifts in trading activity that can have broader implications for the value of a currency and the FX market in general.”
Williams argues dollar weakness reflected hedging mechanics rather than fundamental reassessment of U.S. assets.
“Understanding this distinction is critical because it suggests that the dollar's weakness stemmed largely from the mechanics of how hedging flows transmit through the FX market, rather than from a sudden shift in asset allocation.”