The recent remarks from Andrew Hauser, the Deputy Governor of the RBA, discuss the current economic climate.
He suggests that predictions about the decline of the US dollar and the Australian hedging model are premature.
Persistent Uncertainty In Global Markets
Hauser also notes the persistent uncertainty in global markets.
He emphasises the need for pension funds to increase their use of FX hedging.
This is crucial to avoid breaching concentration limits, especially as these funds seek more international investments due to a shortage of domestic assets.
While his speech mainly addresses issues related to pension and superannuation funds, it does not delve into monetary policy specifics.
The RBA is reinforcing the idea that the Aussie dollar is a reliable hedge against global market fear. This means we should continue to expect the AUD to fall when global stock markets get nervous. We saw this exact relationship hold during the market turbulence earlier in 2025, suggesting it’s a solid strategy to keep in mind.
With global uncertainty high, and the VIX volatility index staying elevated above 20 for the past month, trading volatility itself is key. Options strategies that benefit from large price movements, such as straddles on the AUD/USD, could be useful. This is a way to position for a significant market event without betting on the specific direction.
Structural Selling Pressure From Pension Funds
We must factor in the structural selling pressure from Australia’s massive pension funds, which now manage over A$4 trillion. These funds are increasingly investing overseas and must sell Australian dollars to hedge their foreign assets. This creates a natural ceiling on the currency’s value, making it sensible to consider selling into any sharp rallies.
Data released in August 2025 showed that these superannuation funds now have a record 45% of their assets invested internationally. This is not a short-term trend but a long-term capital outflow that will require constant hedging activity. For us, this points to a consistent supply of Australian dollars hitting the market, which should dampen any significant upward momentum.
The comments also confirm that the US dollar’s role in this hedging model is secure. When global risk aversion spikes, capital still flows into the perceived safety of the US dollar. Therefore, a short AUD/USD position remains one of the most direct ways to hedge a portfolio against a potential global downturn, a tactic that proved effective during the volatility spikes of 2022.
