US Dollar Exposure Hits Record High Amid Strong Equities and Bonds
US dollar exposure is at an all-time high in global portfolios, according to BNY's Geoff Yu. The bank notes that strong buying in both equities and bonds has generated significant rebalancing signals, with USD exposure elevated across the board.
The US dollar was the most heavily bought currency, with a marginal flow score more than twice that of JPY, the next strongest. This supports BNY's view that cross-border dollar exposure is at a record high, with equity and fixed-income ownership remaining elevated despite recent declines in memory-chip stocks.
As a result, hedge ratios remain low, and USD allocations are high. The bank recommends increasing FX hedges instead of selling U.S. assets, as this will help reduce risk without cutting US allocations outright.