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Foreign Currency Exposure and Hedging in Australia

Author

Listed:
  • Anthony Rush

    (Reserve Bank of Australia)

  • Dena Sadeghian

    (Reserve Bank of Australia)

  • Michelle Wright

    (Reserve Bank of Australia)

Abstract

The 2013 Australian Bureau of Statistics (ABS) Foreign Currency Exposure survey confirms that Australian entities’ financial asset and liability positions remain well hedged against a depreciation of the Australian dollar, either through the use of foreign currency hedging derivatives or through offsetting foreign currency asset and liability positions. Even before taking into account the use of hedging derivatives, Australian entities as a whole have a net foreign currency asset position with the rest of the world. After accounting for hedging derivatives, this overall net foreign currency asset position increases slightly. This is primarily because the banking sector hedges all of its net foreign currency liability exposure, although this is partly offset by other financial corporations hedging part of their overall net foreign currency asset exposure. As a result of this net foreign currency asset position, the Australian economy’s net overall foreign liability position would not in itself be a source of vulnerability in the event of a sudden depreciation of the Australian dollar.

Suggested Citation

  • Anthony Rush & Dena Sadeghian & Michelle Wright, 2013. "Foreign Currency Exposure and Hedging in Australia," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 49-58, December.
    • Handle: RePEc:rba:rbabul:dec2013-06
    as

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    File URL: https://www.rba.gov.au/publications/bulletin/2013/dec/pdf/bu-1213-6.pdf
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    References listed on IDEAS

    as
    1. Christian Vallence, 2012. "Foreign Exchange Reserves and the Reserve Bank’s Balance Sheet," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 57-64, December.
    2. AfDB AfDB, . "Annual Report 2012," Annual Report, African Development Bank, number 461.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Irving Fisher Committee, 2017. "Uses of central balance sheet data offices' information," IFC Bulletins, Bank for International Settlements, number 45.
    2. Claudio Borio & Robert Neil McCauley & Patrick McGuire, 2017. "FX swaps and forwards: missing global debt?," BIS Quarterly Review, Bank for International Settlements, September.
    3. Sara Ma, 2014. "Why has the Net Income Deficit Narrowed?," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 19-26, June.
    4. Gan-Ochir Doojav & Kaliappa Kalirajan, 2020. "Financial Frictions and Shocks in an Estimated Small Open Economy DSGE Model," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 18(2), pages 253-291, June.
    5. Megan Garner & Anna Nitschke & David Xu, 2016. "Developments in Foreign Exchange and OTC Derivatives Markets," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 63-74, December.
    6. Laura Berger-Thomson & Blair Chapman, 2017. "Foreign Currency Exposure and Hedging in Australia," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 67-76, December.
    7. Emese Kuruc & Bruno Tissot & Philip Turner, 2017. "Looking at aggregate currency mismatches and beyond," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Uses of central balance sheet data offices' information, volume 45, Bank for International Settlements.
    8. Claudio Borio & Robert Neil McCauley & Patrick McGuire & Vladyslav Sushko, 2016. "Covered interest parity lost: understanding the cross-currency basis," BIS Quarterly Review, Bank for International Settlements, September.
    9. Cottrell, Simon & Karpavičius, Sigitas, 2021. "Does foreign monetary policy drive Australian banks' wholesale funding costs?," Global Finance Journal, Elsevier, vol. 50(C).
    10. Michael Chui & Ingo Fender & Vladyslav Sushko, 2014. "Risks related to EME corporate balance sheets: the role of leverage and currency mismatch," BIS Quarterly Review, Bank for International Settlements, September.
    11. McCauley, Robert N., 2015. "Does the US dollar confer an exorbitant privilege?," Journal of International Money and Finance, Elsevier, vol. 57(C), pages 1-14.

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