Bank of America Global Research discusses the impact of equity-related FX hedging on G10 currencies.

"We have previously argued that equity-related FX hedging may have contributed to yen weakness since 2025. We expand the analysis to cover major currencies. Given the lack of comprehensive statistics on currency hedging and the multiple assumptions required, the results should be interpreted with caution. Nevertheless, it is worth putting this hypothesis on the table.

The impact of FX hedging appears to have been particularly pronounced as a downside pressure on the yen. By contrast, for other G10 currencies (ex-USD), hedging has generally acted as a supportive factor and may have supported cross-yen pairs. In particular, SEK, CHF, CAD, and AUD may have benefited from hedging flows during the latest AI-driven equity rally since 2Q25.," BofA notes.

"Risk-reward favors being long yen given the combination of near-term caution of our US and Japanese equity strategy teams and the risk of yen-buying intervention. We maintain at least a short-term cautious or bearish stance on CAD and CHF and we think the risk is skewed to the downside for CHF/JPY and CAD/JPY. We have recommended selling CHF/JPY," BofA adds.