Citi's Prelim Rebalancing Model Points to USD Sales into April Month-end

Citi's prelim month-end FX hedging model points to a greater-than-average need to sell USD in April.

• Citi write that US equities and bonds have out-performed this month, meaning foreigners' needs to hedge gains in US assets will likely dominate this month-end's rebalancing.
• Both bond and equity investors are likely to be USD sellers, although equities hedge rebalancing contributes 86% to the signal.
• Other standouts include GBP: Citi write that the USD sell signal exceeds 1.5 standard deviations in all crosses except GBP where good performance of UK equities and bonds creates some offsetting GBP selling needs.
• They conclude that the average signal strength across all USD crosses measures 1.7 standard deviations. Signals of this magnitude have occurred only 5% of the time since 2004.