CitiFX Quants month-end FX hedge..............>

FOREX: CitiFX Quants month-end FX hedge rebalancing model points to significant

USD buying and selling of all other currencies on Monday, 31st December. The

signal strength is large by historical standards, measuring around 2.3 standard

deviations and is the highest USD buy signal in ten years.

- The reason for the strength of the signal has been the significant

underperformance of US equities month-to-date, with the MSCI US having corrected

lower by over 10%. After outperforming global peers for most of 2018, US stocks

have posted the worst month-to-date loss among developed equity markets. Only

Japanese equities come close to matching US declines with a loss of over 8%.

- USD rebalancing needs dominate this month's signal which is fairly uniform

across all crosses. The strongest signal, at -2.57 standard deviations is to

sell EURUSD while signal to buy USDJPY is weakest at 1.57 standard deviations.