Lack of CSAs restricts forex hedging options for Australian institutions

Returns for hedging via long-term cross-currency swaps are attractive, but few are able to do so because of the lack of credit support annexes in place


The extra pick-up from hedging foreign exchange exposure via the use of longer-dated cross-currency swaps has made this an attractive option for Australian institutional investors, but the lack of credit support annexes (CSAs) in place by the majority of asset managers means that they are unable to do so.

The Australian dollar cross-currency swap curve has undergone a shift over the past six months due to the rapid depreciation of the yen against other currencies such as the Australian and US

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