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Dollar hedges steady as U.S. cross-border exposure stabilizes

BNY says the July Fed decision mattered more for FX than the Treasury buyback, with dollar hedges largely unchanged over the past two weeks.

Reported · Written up by our desk · Major Pairs

FXStreet reports BNY strategist Geoff Yu said U.S. cross-border exposure has stabilized, with non-U.S. domiciled investors not pushing for further reductions. Yu pointed to data showing outright dollar FX hedges, tracked through cross-border dollar holdings, have remained largely unchanged over the past two weeks.

The strategist also said U.S. equity holdings have improved somewhat as risk sentiment stabilized. Yu argued the July Fed decision was more important for currency moves than the Treasury buyback, noting the Fed continues to anchor the front end of the curve.

BNY further said the Treasury buyback’s market impact has been marginal, suggesting limited direct effects beyond the initial announcement. Yu characterized the dollar as having acted as a “release valve” while any diversification away from U.S. assets remains selective.

Looking ahead, Yu said investors should watch dollar cash flows, FX hedging, inflation expectations, and U.S. data for signs of deterioration that could shift diversification from tactical to structural U.S. exposure reduction.

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