Citigroup Team Goes Down Under for Its U.S. Election Risk Hedges

The Australian dollar is the tool of choice to protect core investment positions since Treasuries and the greenback aren’t as effective risk-off hedges as they used to be, according to Citigroup Inc.

A look at the correlations between benchmark Treasury yields and U.S. stocks suggests Treasuries no longer have the sensitivity to equity selloffs they once did, while haven rallies in the dollar are “less potent,” strategists including Jeremy Hale wrote in a note Thursday. The Australian dollar -- especially against the Swiss franc -- has been much more correlated to stocks, leaving it better placed as an avenue to hedge against equity downside, they said.