EUR hedge ratio inched up further - Nomura

The research team at Nomura notes that major lifers’ FX hedge ratio declined in H2 FY2016 but they raised their hedge ratio of EUR assets.

Key Quotes

“After their hedge ratio rose sharply in H1 FY2016 amid political risk events, it normalised somewhat. However, the ratio remains higher than a year ago, suggesting further room for them to reduce their FX hedge ratio. The fall in the hedge ratio during this period was concentrated in USD assets, and they raised their hedge ratio of EUR assets. This suggests their cautious stance before the French Presidential elections. Their hedging adjustment as the ECB normalises its monetary policy will be important for EUR/JPY, while political risks have diminished for now.”