Australia's $2.25 trillion foreign-currency exposure: A growing risk for superannuation?

Australia's exposure to foreign-currency assets has increased substantially as Australian investors expand their overseas investments.

New Australian Bureau of Statistics figures show Australian resident enterprises had $2.25 trillion in net foreign-currency asset exposure at March 2026, after accounting for derivatives. That is an increase of $579 billion, or 34.6%, since March 2022.

The figures reveal an important dimension of Australia's increasingly international financial system.

Why does Australia have foreign-currency exposure?

Australian banks, superannuation funds and other investors hold overseas shares, bonds and financial assets.

These investments generate returns in foreign currencies, which fluctuate against the Australian dollar.

Consider an Australian superannuation fund holding US shares worth US$100 million.

If the Australian dollar appreciates by 10% against the US dollar, the Australian-dollar value of those shares falls by approximately 9.1%, assuming the US share price remains unchanged.

Conversely, a weaker Australian dollar increases their Australian-dollar value.

What does hedging achieve?

Investors use foreign-exchange derivatives to reduce currency risk.

The ABS reports that 28.3% of foreign-currency assets were fully or partially hedged through derivatives, compared with 27.8% in 2022.

However, hedging creates another potential problem.

When exchange rates move, funds may need cash to settle derivatives or meet collateral requirements.

A fund can therefore be protected against currency losses while simultaneously experiencing liquidity pressure.

Why does this matter for superannuation?

Australian superannuation funds increasingly invest internationally while facing growing retirement withdrawals.

They must manage investment risk, currency exposure and the cash needed to meet benefit payments.

During severe market disruptions, these demands can occur simultaneously.

Importantly, the ABS figures cover the entire resident-enterprise sector, not superannuation alone. The increase also reflects asset values and exchange-rate movements, not simply new investment.

The financial-stability challenge is ensuring that growing international investment exposure is supported by sufficient liquidity when markets become volatile.