The “King Dollar” trade is losing one of its biggest backers.
Australian Retirement Trust (ART), Australia’s second-largest pension fund (A$353B / $237B AUM), announced it is aggressively increasing its currency hedging on US assets. While the fund is not selling its US stocks, it is betting that the Greenback’s run of dominance is over for 2026.
📉 THE STRATEGY PIVOT:
- The Action: ART is moving from an unhedged/low-hedged posture to a higher hedge ratio on its ~A$53 billion US equity portfolio.
- The Rationale: Traditionally, the USD acts as a shock absorber for foreign investors (stocks down = USD up). ART believes this correlation is breaking.
- Andrew Fisher (Head of Portfolio Strategy) notes: “The U.S. dollar seems to be the one place where I think the U.S. administration is going to get what it wants… It’s hurting U.S. competitiveness, and I think they’re going to succeed.”
🦅 POLICY DIVERGENCE: The macro setup for 2026 supports the bearish USD view:
- USA: Markets pricing in ~50 bps of cuts, narrowing the yield advantage.
- Japan & Australia: Central banks expected to hike or hold firm, strengthening the Yen and Aussie Dollar.
- Geopolitics: President Trump’s recent tariff threats (Greenland dispute) have triggered a “Sell America” reaction in FX markets, driving capital into the Swiss Franc and Gold rather than the Dollar.
💡 ANALYST TAKEAWAY: This is a textbook example of “regime change” in portfolio construction. For the last decade, being unhedged in US equities was a “free lunch” for global allocators (currency gains + equity gains). With the Fed pivoting to cuts and the White House explicitly favoring devaluation to boost exports, that free lunch is gone. Expect other sovereign and pension funds to follow ART’s lead, potentially accelerating the USD slide.
👇 FX Strategists: Is the “weaker dollar” policy actually achievable without spiking US inflation, or is the market mispricing the Fed’s room to cut?