Foreign Property Investors Hedge Bets Declining as U.S. Interest Rates Dip

According to CBRE, with the sharp drop in U.S. interest rates in 2019, the differential between U.S. rates and those in countries with lower-yielding foreign currencies has narrowed, contributing to lower hedging costs for foreign investors acquiring U.S. dollar-denominated assets. Across eight major global currencies, the annual cost of hedging against U.S. dollar (US$) depreciation has decreased year-to-date for all but the Australian dollar (AU$). Except for Chinese (CNY) investors, who are the only ones in this group to achieve a boost in IRR when purchasing an asset in US$ and hedging back to local currency at current forward exchange rates, Canadian (C$) investors currently have the lowest hedging costs. The largest decreases year-to-date have been for Japanese (JPY) and Singaporean (SG$) investors.