Are Foreigners Selling US Assets (Part II)

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Careful flow analysis suggests an allocation shift away from the dollar may have peaked and will likely be a less dominant force in H2 compared to H1 2025.This does not necessarily mean that USD is set for recovery; rather, traditional fundamentals, such as the cyclical state of the US economy (and Fed policy) will now again play a bigger role in potential further USD weakness.IntroductionSince March, we have been hyper-focused on a potential asset allocation shift out of US assets, with STRATEGIC implications for the dollar.This is something we have been tracking day and night for Exante Data’s institutional clients. But we also did publish a public substack on the topic in April (see here), with the following key observations:First, we highlighted that April saw highly unusual foreign selling of US fixed income (and likely driven by the private sector.Second, we highlighted that Japanese investors had been sellers of international fixed income (and likely US fixed income) during April.Third, we highlighted that anecdotal information from CIOs in our network, as well as signals from options markets pointed to dramatic USD hedging demand (put buying), especially in April.In this update, we evaluate the structural flow situation with a look to trends in H2, given that almost four months have passed since our last update. We also present more information on global equity flow dynamics (which have been important) and discuss some concrete metrics of hedging flowsThe equity flow dimension: From US exceptionalism to ?Before we turn to the topics covered in the April Substack (se…