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Year-End Dollar Demand Showing Up In X-ccy Basis Markets

USD

Signs of USD demand surrounding year-end turn have shown up in the x-ccy basis space, with the EUR, GBP, JPY & AUD 3-month measures all pulling lower over the last 24 hours as end the end of year period falls into that horizon (based on settlement dates).

  • Note that most of the 6-month USD x-ccy basis metrics moved notably lower at the end of June (when the year-end turn was captured), with the pull lower in GBP & JPY mostly consolidated, while the EUR measure has registered fresh lows in recent days.
  • AUD 6-month was a little more resilient then, and the 3-month measure hasn’t experienced as sharp of a pull lower vs. EUR, JPY & GBP.
  • This year’s move is probably being exacerbated by the rapid rate of Fed tightening observed during ’22, alongside broader economic worry re: a hard landing scenario, which has resulted in a particularly strong year for the greenback when it comes to G10 FX trade.

Fig. 1: EUR/USD, JPY/USD, GBP/USD & AUD/USD X-ccy Basis Swaps

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Signs of USD demand surrounding year-end turn have shown up in the x-ccy basis space, with the EUR, GBP, JPY & AUD 3-month measures all pulling lower over the last 24 hours as end the end of year period falls into that horizon (based on settlement dates).

  • Note that most of the 6-month USD x-ccy basis metrics moved notably lower at the end of June (when the year-end turn was captured), with the pull lower in GBP & JPY mostly consolidated, while the EUR measure has registered fresh lows in recent days.
  • AUD 6-month was a little more resilient then, and the 3-month measure hasn’t experienced as sharp of a pull lower vs. EUR, JPY & GBP.
  • This year’s move is probably being exacerbated by the rapid rate of Fed tightening observed during ’22, alongside broader economic worry re: a hard landing scenario, which has resulted in a particularly strong year for the greenback when it comes to G10 FX trade.

Fig. 1: EUR/USD, JPY/USD, GBP/USD & AUD/USD X-ccy Basis Swaps