Is it time to rethink currency hedging strategies? By Stan Shamu 15 December 2020 The Australian dollar is one of the more volatile international developed market currencies. Despite this, for those willing to take unhedged offshore equity positions over the past decade, the Australian dollar’s trend has been very favourable, having fallen from around US$1.10 during the 2011-12 European sovereign bond crisis to around US$0.73 currently. Looking out over the next three to five years, one needs to consider whether that tailwind will continue to be in play? Of course, forecasting currencies is unusually difficult. With the Australian dollar likely to retain much of its risk-on/risk-off qualities, it remains vulnerable to a near-term pullback. However, both the short-term (multi-year global recovery and low US interest rates) and longer-term fundamentals (improving trade and relative debt positions) argue a relatively positive outlook for the currency. It’s no surprise some analysts are forecasting its rise over the coming years.