The development
In its December 2025 Quarterly Review, the BIS examined the sharp increase in global FX trading around April 2025. It linked the environment of tariff uncertainty and dollar weakness with heightened hedging activity, including outright forwards. This article revisits that historical analysis. It does not present the survey as a measure of October 2026 trading.
Source: BIS Quarterly Review, December 2025.
FOLITIC analysis: the hedge moves with the portfolio
A fund holding foreign assets can change its currency hedge even when it keeps the same securities. If the portfolio’s market value changes, the currency amount being protected may no longer match the original forward position.
That adjustment can generate transactions without a new directional bet. Rolling an expiring contract also creates activity while preserving broadly similar exposure. These mechanics help explain why turnover can rise faster than the stock of underlying foreign investments.
What a reader should take from the evidence
Separate the observation from a forecast. A historical increase in hedging does not establish the next direction of the dollar, nor does it show that every manager used the same hedge ratio.
For a portfolio owner, currency protection has a cost and can change reported returns independently of the foreign asset’s local performance. Compare the investment horizon, hedge maturity and cash requirements. The BIS review is valuable because it directs attention to who is trading and why, rather than encouraging a simple interpretation of volume as a unanimous market view.
Photo: File photograph of the Bank for International Settlements building in Basel. Credit: Taxiarchos228 via Wikimedia Commons. Image license: Free Art License. Displayed with a responsive crop. This file photograph illustrates the subject or location and does not depict the reported transaction.
