BofA: European Asset Managers' USD Hedge Ratio Adjustments Modest
BofA notes modest USD hedge ratio adjustments by European asset managers
Key takeaways: European asset managers' USD hedge ratio adjustments this year appear modest, in line with responses in our recent surveys Low vol and re-established FX/equity correlation in line with Danish downward adjustments.
We consider a simple measure Medium-term risks around $ hedge ratios skewed in favour of EUR.
But near term we don't count on adjustments & stay bullish $ By Michalis Rousakis (H)edging away European asset managers' USD hedge ratio adjustments this year appear modest.
This echoes responses by benchmarked investors in our recent sentiment surveys.
It is also consistent with the low implied volatility and the "re-established" EUR-US equity correlation amid the energy-price shock.
A simple measure of USD hedge pressure is consistent with Danish asset managers having lowered USD hedge ratios this year (Chart of the day).
Where do we stand? Over the medium term, we think risks around European asset managers' USD hedge ratios and allocations remain skewed in favour of EUR.
But we do not count on such adjustments near term and stay tactically bullish USD.
BofA Global Research