Currency Hedging Bulges Thanks to ‘Flight From Zero,’ BIS Says

  • Demand is driven by investors, companies seeking better rates
  • Japanese life insurers among those seeking dollar assets: BIS

The ripple effects of global monetary easing just keep on coming.

Demand for currency hedging is increasing, indirectly spurred by a handful of central banks whose unprecedented policies are crushing interest rates in some the biggest economies, according to the Bank for International Settlements.

As quantitative easing pushes bond investors to look abroad for higher yields and companies flee to foreign markets to borrow more cheaply, they need to hedge their currency exposure. It’s yet another unintended consequence of stimulus that has driven yields below zero on more than $8.3 trillion of sovereign debt, undermined banks’ lending income and raised costs for pension funds that have pledged fixed returns…

Currency Hedging Bulges Thanks to ‘Flight From Zero,’ BIS Says

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