I was reading FX hedged investments do not have an impact on the FX rate. For example, a Japanese fund buying US treasuries fully FX hedged. I understand the hedging is usually done through short term FX swaps/forwards. Would you be able to explain why acquisition of foreign currency assets does not have an impact on the FX rate when the investment is FX hedged?
Forwards have a large impact on the spot market, swaps much less so. For example a 100m usd swap against mxn has a spot delta of less than 1m usd for all tenors less than a year ( and actually quite a bit longer in the current rate environment).
Where swaps do impact the spot market is in the cost of carry, large swap transaction drive the funding basis between the currency pairs in question and that determines the cost of keeping the spot position open or the price of the outright forward.