Citi-Month-End FX Hedge Rebalancing: May......>

FOREX: Citi-Month-End FX Hedge Rebalancing: May 2019 Final Estimate

- The final estimate of the month-end FX hedge rebalancing model suggests

moderately strong buying of USD on Friday, 31st May. The signal gains strength

over the past week with almost all signals except JPY  coming close or below the

-1 historic standard deviation threshold.

- Developed market equities collapsed into month-end with Sweden posting the

largest loss. US equities continued to underperform posting a return of -5.3%

MTD as new tariff tensions spurred a rise in risk aversion (Citi Global and EM

Macro Risk Indices are in risk averse territory and at their highest since

January). Investors sought refuge in safer bond markets which outperformed, with

UK bonds gaining the most at +2.9% MTD.

- The buy USDJPY signal is a notable exception coming in weak at only -0.2 std.

dev. This is largely driven by the assumption that Japanese investors have

traditionally held low hedge ratios on their foreign equity investments. Event

risk comes from Canadian and US economic releases around the fixing time.