Westpac Bank said that Australian pension funds increased their currency hedging on overseas stocks in the last quarter, indicating that many pension funds are closely watching for possible changes in the performance of the US dollar in the safe-haven market.
Analysis shows that industry funds dominate Australia’s A$4.3 trillion (US$2.8 trillion) retirement savings system, including the largest players such as AustralianSuper. In the three months to the end of June, these funds increased the hedging portion of their international equity holdings from 17.9% in the previous quarter to 21.5%.
Richard Franulovich, the head of foreign exchange strategy and author of the report, said the scale of the adjustment was unexpected. The report is based on quarterly data released by the Australian Prudential Regulation Authority this week. He said the move highlights the increased attention super funds are paying to the potential change in the role of the US dollar as a safe-haven currency.
In the past, dollar-denominated assets, such as US stocks, have served as a stabilizer for Australian investors during market turmoil. This is because the US dollar typically strengthens when market volatility intensifies, thereby boosting the value of US assets when converted into Australian dollars.
However, if global investors rely more on other safe-haven currencies such as the Japanese yen or the Swiss franc during market turmoil, this connection may start to weaken. Australian pensions typically have about half of their funds invested overseas, and thus may find themselves more vulnerable to shocks and therefore increase foreign exchange hedging.
“This is a deeper issue that the fund is discussing,” Franovic said when referring to the potential changes in the role of the US dollar. “It is a highly prioritized discussion.”
Technical analysis:
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Gold: Yesterday, our plugin alerted us to buy at 3638. The price rebounded to a high of 3649, with a profit-to-loss ratio close to 1:1.5. For today’s trading, we need the price to recover above 3645 to continue with a long position; or we can wait for the price to clear the liquidity around 3620 before starting to look for long signals. For detailed positions, please consult the plugin.
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Nasdaq: Yesterday, our plugin alerted a break through the blue zone buy stop, which yielded a good result. Today, we will continue to maintain the low buy at the support level around 23800. At the same time, we will keep an eye on the breakout signal. Once the price stabilizes above 23900, we can also try a short-term long position. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: Yesterday, the plugin alerted a break above 63.85. A buy limit was placed in the blue zone. The price rose to above 64.30, but it did not retrace to the blue zone. For today, we can continue to monitor the support at the blue zone. If it stabilizes around 63.50, we can attempt 1-2 buy operations. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Key economic data and events to focus on today:
20:15 Eurozone ECB refinancing rate
20:30 U.S. August Unadjusted Consumer Price Index (Year-on-Year)
20:30 U.S. Seasonally Adjusted Initial Jobless Claims (in thousands) (to 0906)
At 20:45, the President of the European Central Bank, Christine Lagarde from Germany, will hold a press conference on monetary policy.
