Canada's pension fund increases hedging as the dollar is likely to continue facing downward pressure.

[Coin World][TD Securities: The Next Risk Facing the Dollar Comes from Canadian Pension Funds Increasing Hedging Efforts] TD Securities believes that the dollar will further fall, as Canadian investors, one of the largest holders of U.S. stocks, face pressure to increase the currency hedging ratio of their dollar assets. "Since the beginning of this year, the safe-haven appeal of the dollar has diminished, leading to increased demand for these funds to hedge their long positions in U.S. assets," the TD Securities team wrote in a report on Friday. A further decline in the dollar "will further prompt Canadian investors to adjust their hedging policies, which may in turn exert additional downward pressure on the currency pair." In the first half of 2025, the Canadian dollar has risen more than 5% against the U.S. dollar, marking the best start in nearly a decade. TD strategists predict that the Canadian dollar will continue to rise in the future. They expect the Canadian dollar to rise to 1.31 against the U.S. dollar by December, which would be the strongest level since 2022, about 4% higher than the current level of approximately 1.3665. The TD team estimates that Canadian pension funds - some of which have explicit policies for non-full hedging of U.S. assets - have a hedging ratio of about 10% to 15% for their holdings. Overall, Canadian investors hold about $1.8 trillion in U.S. stocks. Analysts wrote that a marginal increase of 5% in the hedging ratio could lead to about $90 billion in dumping pressure on the USD/CAD.