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Geoeconomic Competition and Capital Reallocation in Global FX Funding -- by Yu An, Amy W. Huber
A new academic study examines how countries compete for foreign exchange funding through policy actions that shift investment returns and funding costs, inducing global portfolio rebalancing by private investors. Using a proprietary dataset and a novel framework identifying 'funding fronts,' researchers find FX funding competition is concentrated around a dominant U.S. dollar front that drives disproportionately large capital reallocations globally. The study constructs time-varying measures of