State Street: U.S. investors cut back on overseas hedging, weighing on dollar

State Street said the main reason for the dollar's decline earlier this year was that US investors cut back on foreign exchange hedging for overseas investments, rather than that global investors hedged more of their US portfolios. "The more pronounced activity came from domestic investors adjusting their foreign hedging ratio," Chris Pizzotti, global head of foreign exchange sales and trading at State Street Markets, told the Federal Reserve Bank of New York's FX market structure conference on Wednesday. "We estimate that domestic investors have halved their hedging ratio, which has actually contributed to the weakening of the dollar. The uncertainty created by Liberation Day remains, and naturally there is a discussion about de-risking."