US rates surge sparks new wave of FX net investment hedging
Corporates pile into currency hedges to protect value of foreign assets and capture positive carry
The jump in US borrowing costs is unleashing a new wave of net investment hedging (NIH), as corporates look to take advantage of favourable interest rate differentials to protect the value of foreign assets and lock in carry gains.
NIH shields the reported value of foreign assets from currency fluctuations in accounting statements, and, for US companies, hedging investments in countries with higher interest rates has typically come at a cost.
But with the US Federal Reserve hiking overnight rates
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