A senior official at the Federal Reserve Bank of New York stated that investors seeking to hedge against currency volatility risks drove the sharp decline in the dollar last year, rather than divestment from U.S. assets. Anna Nordstrom, head of the Fed's market group, said that one year after President Donald Trump announced comprehensive tariff policies, the dollar's decline was driven by investors hedging their exposure in the United States—using derivatives to strip away foreign exchange risk—rather than selling assets. These hedging activities spilled over into the spot foreign exchange market, weakening the dollar, but there was no large-scale sell-off of underlying assets.
