Dollar-hedged equity rush

摘要

Us money has poured into European equities in 2015, most of it in dollar-hedged format, driving extreme negative foreign exchange/equity correlation and leaving the Street with a long correlation exposure that is proving difficult to carry given limited recycling opportunities. A surge of demand for dollar-hedged EuroStoxx 50 index exposure has caused Eurodollar and EuroStoxx 50 to move in opposite directions, with three-month realised correlation falling to historic lows of negative 40% in recent weeks. The relationship had been strongly positive since 2008, reaching a peak of about 70% in 2012, before falling into negative territory in mid-2013, according to data from UBS.