Aussie dollar decline puts FX hedging strategies in the spotlight
The rapid slide of the Australian dollar has refocused attention on currency risk by local firms
When the Australian dollar broke through parity with the US dollar in 2011 there was little appetite for hedging away currency risk by Aussie firms concerned this would also have limited any upside potential. Instead, many institutional investors used the new-found purchasing power of the AUD to increase their exposure to offshore assets (see chart 1), which was one way for particularly large investment vehicles to get around Australia's limited pool of assets. At the same time, the strength of
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