European investors ramp up FX hedging as ‘dollar smile’ fades
European asset managers and pension funds are adding more currency hedges to their US equity portfolios following a breakdown of the so-called dollar smile.
The greenback typically appreciates when US stocks are booming or under extreme stress. For foreign investors, the phenomenon – known as the dollar smile – offers a natural hedge against sharp selloffs in US holdings.
The tariffs unveiled by US president Donald Trump on April 2 turned the relationship on its head. The S&P 500 shed 5% through
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