FX Hedging Cost Drop Sparks Debate on Asian Bond Protection Bets
A decline in currency hedging costs across Asia is fueling a debate among bond investors on whether they should fortify their portfolios with cheap protection or let the opportunity slide.
Three-month forward implied yields for dollar-won have fallen to around 1.7% this week, the lowest level in more than two years, signaling plummeting hedging costs for South Korean bonds. The same gauges for currencies in Thailand, Indonesia, China and India are also below their one-year averages, according to Bloomberg calculations.
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