Citi's preliminary May month-end FX hedge.....>

FOREX: Citi's preliminary May month-end FX hedge rebalancing estimate points to

USD selling and buying of all other currencies.

- Citi note that "relative asset performance in May has been largely opposite to

the prior month with US bonds & equities outperforming most other major markets.

This means that foreign investors with US asset exposure, a dominant component

of any global asset benchmark, need to sell USD to bring their hedges in line

with increased asset values. Equity hedge rebalancing flows dominate this

month's signal, explaining about 7.5bp of the 7.8bp estimated global net USD

selling. The fixed income rebalancing signal is on the margin also USD negative

because US investors with Euro Area fixed income exposures need to sell off some

of their hedges. Poor performance of Euro Area equities and bonds makes buy

EURUSD the strongest signal this month-end at +1.1 standard deviations. Other

USD sell-signals measure around 0.8 standard deviations."