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Citi's Final Month-End Model Continues to Point to USD Buying


Citi's final month-end flow model estimate published today:

  • Final estimate continues to point to USD buying. The signal is broadly unchanged from the preliminary estimate published last week.
  • Although the US markets are not the worst performers, the dominance of US assets in global portfolio allocation and our assumption that foreigners tend to hedge their FX exposures more leads to a net USD buy-signal.
  • Average USD buy-signal is ~1.8 SD. The signal to sell EURUSD is weaker at 1.2 standard deviations because poor performance of EZ bonds may create some offsetting flows.
  • Signal to sell JPY vs USD is strongest at around 2 standard deviations, driven by relatively good performance of Japanese assets. This reduces foreign JPY buying needs and allows domestic JPY selling to reduce foreign fixed income hedges to dominate.
  • With the exceptions of GBP, NOK and SEK, Citi haven’t seen significant real money selling of G10 currencies in recent days, suggesting little or no early rebalancing this month.

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