Why The World Started Hedging Its US Dollar Exposure

In this episode of the Odd Lots podcast, hosts Tracy Alloway and Joe Weisenthal interview Hyun Song-Shin from the Bank for International Settlements (BIS) about the unusual dynamics in the currency markets, particularly the dollar's behavior. They discuss the BIS's triennial survey of FX markets, which highlights a surge in FX swap and spot transactions, suggesting investors are hedging dollar exposures. The conversation explores why investors might be hedging rather than selling dollar assets, the role of short-term interest rates in hedging costs, and parallels between dollar assets and emerging market bonds. They also touch on the resilience of emerging markets, the factors influencing gold prices, and potential credit-oriented concerns, including the growth of government debt versus private sector credit.