Australia's AU$4.2 trillion pension sector is rethinking its long-standing bets on the United States' assets and the dollar, as weakening confidence in American growth and volatile Sino-U.S. trade tensions prompt a reassessment of exposure to the world's largest economy.

Australian superannuation funds typically hold a low level of foreign exchange (FX) hedging for their overseas stock portfolios. But when U.S. markets dropped this year, some funds allowed their hedging ratios to rise by not fully adjusting their currency positions.

Troy Fraser, head of FX sales for Citi in Sydney, said pension funds were now reviewing their investment mix, hedging costs, and........

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