Foreign pension funds and insurers are holding huge piles of US assets with little protection against a falling dollar — bad for the dollar if sentiment turns, and a warning sign for anyone holding US stocks and bonds from abroad.

• Big overseas investors have hedged only about 41% of their dollar exposure, the least since 2015.
• They dropped protection because the dollar usually rises in a crisis — but that safe-haven role is now in doubt.
• The dollar fell around 2% this quarter as investors bet US policy will weaken it further.
• Hedging got cheaper as the gap between US and foreign interest rates narrowed, making it easy to rebuild protection — and each small shift means selling billions of dollars.
• Japan, Taiwan and Canada are among the largest holders; a 5-point rise in hedging alone would mean roughly $230 billion of dollar selling.

Outlook: If markets keep pricing in Fed rate hikes while foreign rates catch up, investors are likely to rebuild hedges and keep pressure on the dollar.