Andrew Hauser, the Deputy Governor of the RBA, recently shared insights about the current economy. He believes it’s too early to predict a drop in the US dollar or the Australian hedging model.

Ongoing Uncertainty in Global Markets

Hauser pointed out the ongoing uncertainty in global markets. He stressed that pension funds should use more foreign exchange (FX) hedging to prevent exceeding concentration limits. This is important since these funds are looking for more international investments because of a lack of domestic options. While his speech focused on pension and superannuation funds, it didn’t go into details about monetary policy. The RBA is supporting the view that the Aussie dollar is a good hedge against global market fears. This means we can expect the AUD to drop when global stock markets are shaky, as we saw during market turbulence earlier in 2025. This trend is a helpful strategy to keep in mind. With high global uncertainty and the VIX volatility index remaining above 20 for the last month, trading volatility matters. Strategies like straddles on the AUD/USD can help benefit from big price shifts. This approach allows investors to prepare for major market events without guessing the direction of the move.

Selling Pressure from Pension Funds

We must consider the continual selling pressure from Australia’s large pension funds, which manage over A$4 trillion. These funds are increasingly investing overseas and need to sell Australian dollars to protect their foreign investments. This creates a natural limit on the currency’s value, so it makes sense to consider selling during sharp rallies. Recent data from August 2025 shows that these superannuation funds have a record 45% of their assets invested internationally. This is a long-term trend that will require ongoing hedging efforts. This indicates a steady supply of Australian dollars entering the market, likely reducing any significant upward movement. Hauser’s comments also confirm that the US dollar remains a crucial part of this hedging strategy. When global risk aversion rises, investors tend to flock to the safety of the US dollar. Thus, taking a short position on AUD/USD is a straightforward way to hedge against a potential global downturn—a strategy that proved effective during the volatility spikes of 2022. Create your live VT Markets account and start trading now.

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