Time to think differently about your currency hedging program?
18 March 2022
For years, Australian institutional investors could rely on a strong positive interest rate ‘carry’ in their hedging program. As interest rate spread differentials between the RBA and the other central banks, specifically the US Federal Reserve (the Fed), narrowed in 2018, the positive rate ‘carry’ disappeared.
While the majority of superannuation funds utilise short-dated forwards to avoid the need to exchange collateral on a daily basis, the utilisation of longer dated forwards to potentially capture the current positive ‘carry’ for your fund may be worth considering.
