A Strategic Approach to FX Currency Hedging | Minds & Markets
In this episode of Minds and Markets, Jafer Naqvi and Mathieu Côté discuss why traditional views of currency as a natural hedge are being challenged. They explain how foreign equity exposure creates currency risk for Canadian investors and outline the key factors - cost, volatility, correlation, and market regimes - that shape a disciplined FX hedging framework, including the role of dynamic hedging across market cycles.
TDAM Talks · Jafer Naqvi, Mathieu Cote
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Show Notes
In the past, currency was often assumed to act as a natural portfolio offset. Today, long held assumptions are being challenged as correlations evolve and policy dynamics shift. Canadian investors with foreign equity exposure can be impacted by currency movements, even when underlying markets perform as expected.
To frame currency risk more deliberately, investors evaluate hedging costs, volatility, correlation behaviour and market regimes. Understanding the application of strategic frameworks and dynamic hedging is essential. Together, these steps support more intentional management of currency risk across market cycles.
Join Jafer Naqvi, Managing Director, Head of Client Portfolio Management, TD Asset Management Inc. (TDAM), and Mathieu Côté, Vice President, Institutional Client Portfolio Management, TDAM, as they explore how evolving market dynamics are reshaping approaches to currency risk management.
Highlights include:
02:50 How Canadian investors create currency exposure through foreign equity allocations
07:05 Why historical currency-equity relationships may be less reliable
08:10 The four core factors shaping a currency hedging framework
12:00 How dynamic hedging can respond to changing market conditions
16:55 Applying a repeatable, strategic approach to currency risk
For a full transcript in English and French, please visit the TD Asset Management Podcast page: https://www.td.com/ca/en/asset-management/insights/podcast
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