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Institutional Insights: Month/Quarter End FX Rebalancing
Several Investment banks have published signals from their month-end FX rebalancing models, and the general consensus indicates that the U.S. dollar is in a relatively neutral to weak position. The month-end portfolio-rebalancing flows are likely to be neutral across the board, as suggested by Credit Agricole's model, which considers the under-performance of the USD in September and the overall movements in equity markets. This model is adjusted for market capitalisation and FX performance. In the context of the USD, the model's most potent sell signal is directed at the JPY. Nevertheless, the bank's corporate flow model indicates that EUR selling is likely. The month-end rebalancing model of Barclays suggests a neutral sign on EURUSD and a weak dollar-selling signal against the majority of currencies. The quarter-end rebalancing model of the bank suggests a moderate dollar-selling signal against the majority of currencies, with a weak signal on the EUR/USD and USD/JPY pairs. The month-end model of SEB suggests that there are minimal rebalancing requirements; however, the most significant transactions are USD/CHF and USD/JPY.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!