The Non-U.S. Bank Demand for U.S. Dollar Assets

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The USD asset share of non-U.S. banks captures the relative demand for USD denominated assets by these investors. An instrumental variable strategy identifies a causal link from the USD asset share to the USD exchange rate. Furthermore, cross-sectional asset pricing tests show that the USD asset share is a highly significant pricing factor for carry trade strategies. The USD asset share also forecasts the movement of foreign currency against U.S. dollar with economically large magnitude, high statistical significance, and large explanatory power, both in sample and out of sample, pointing towards time varying risk premia. It takes 2-5 years for exchange rate risk premia to normalize in response to demand shocks.


Type of resource text
Date created September 1, 2021


Author Adrian, Tobias
Author Xie, Peichu
Organizer of meeting Begenau, Juliane
Organizer of meeting Hansen, Lars Peter
Organizer of meeting Hebert, Ben
Organizer of meeting Piazzesi, Monika


Subject exchange rate disconnect
Subject dollar asset demand
Subject intermediary asset pricing
Genre Text
Genre Working paper
Genre Grey literature

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Adrian, T. and Xie, P. (2022). The Non-U.S. Bank Demand for U.S. Dollar Assets. Stanford Digital Repository. Available at


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