From Schweser qbank, there is the following statement: when considering whether to proxy hedge, “proxy hedge only makes sense when we have high correlations for the currency movements” and that the reason a manager will use a proxy hedge is the manager may expect one currency to underperform relative to another. If currencies are moving in opposite directions, there may be an opportunity to capture extra returns from those movements.
I don’t understand why this is a reason to proxy hedge. A currency hedge shouldn’t be taking a directional view and looking to capture excess returns. Can someone elaborate on this?