Why The World Started Hedging Its US Dollar Exposure
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What’s the surprise about the U.S. dollar’s performance this year?
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Bloomberg Audio Studios, Podcasts, Radio News.
Hello and welcome to another episode of the Odd Thoughts Podcast. I'm Tracy Alloway.
And I'm Joe Weisenthal.
Joe, there are so many huge stories that you could pull out of this year, but I mean like some actually really, really big ones. So we had Liberation Day and the market crash. We had the continued weakness in the US dollar, which has been this sort of slow burn crash across the year. Um and we're recording this, let's see, October seventeenth and, you know, dollar down yet again.
Although it is down, but however, there's been a little, you know, it would hit its low in mid September.
Don't make apologies for the dollar, Jim. No, you know,
I just think Keep going and then I'm All right. Keep going, then I might add something.
Fall in the dollar. But this huge ramp up in the price of gold, which seems to hit a new record all the time. And then we've had the continued strength slash resilience, whatever you want to call it, enthusiasm about AI and the stock market. And it really seems like there's this division at the moment between how people feel about corporate America and how people feel about sovereign America in the form of its currency.
You know what I really regret doing, tracing? I really I really regret it. Did
you have like a hoard of gold that you got rid of versus the gold? No, no,
I'll I took out a gold denominated mortgage. No, I feel so stupid. I feel so stupid. Why did I do that? I could have no I'd get paid in dollars and I took out a gold denominated mortgage. What was I thinking? No, I didn't. But had I done that would have been a very bad trade.
Yes.
Remember those stories from like You know Uh a little bit of a tangent. Remember all those stories from like the Hungarians and they took out those Swiss denominated mortgages back in the two thousands and the That
was very much a Europe thing for a while, yeah.
Yeah, that was a really funny little s we don't have to talk about that. But one thing I was just g j the only reason I caveated the dollar fall, which I do think th it has it is quo quite a bit down from the beginning of the year. All that being said. It is striking in the last several weeks the degree to which a few of the very popular consensus ideas for this year are turning a little bit. And I say that ten-year treasury is the time we're recording this, October 17th, has fallen below four percent. How many times did you hear about the steep in our trade this year? How many times did you hear about fiscal dominance losing control at the long end? Um the dollar it stabilized. So it is a very interesting moment uh for markets in many respects right now.
There's definitely a lot to talk about. Congrats on managing your personal FX liabilities.
Getting paid
in dollars and paying your mortgage in dollars. Well done, Joe. All right.
Why did economists expect the dollar to strengthen after the tariffs, and what actually happened?
Well, you know, this is the kind of thing that a lot of big investors are thinking about at the moment. And uh we should definitely think about it too. And who is the one person that we really like to talk to? It
could only be one.
When we talk about these big trends.
And who is the one person that is always in town? 'Cause we're in Washington DC right now. When we go to a new town, who is the other guy who always is probably gonna be there at the same time?
The person that we run into on the street in various outfits. Although this time you're wearing a suit. So there we go. The last time we ran into you randomly, you were wearing hiking gear and so were we. Anyway, we are here in DC.
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Chapters
8 chapters
1
What’s the surprise about the U.S. dollar’s performance this year?
0:01–3:36
2
Why did economists expect the dollar to strengthen after the tariffs, and what actually happened?
3:36–8:18
3
How did the April “triple‑decline” (stocks, bonds, and the dollar) change market dynamics?
8:18–14:50
4
What does the BIS’s tri‑annual FX‑swap survey reveal about global hedging activity?
14:50–22:14
5
Why are investors increasingly using FX swaps to hedge dollar exposure?
22:14–29:23
6
How are emerging‑market pension funds managing currency risk with FX swaps?
29:23–36:29
7
What role does gold play in today’s risk‑off environment and why is its price soaring?
36:29–43:09
8
What are the broader implications of rising hedge ratios for future market stability?
43:09–48:39
Speakers
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