Citi: EM Carry, funded by EUR
Two changes in the macro landscape create flow opportunities this week: the PBOC rate cut and the extremely dovish speech from Draghi. Both suggest a relief rally. Our Risk Flow Indicators highlight that clients demand for EM Carry has returned – as such light risk taking is the most probable path forward. Investors are unlikely to go “all in” unless the ECB delivers, however our EUR flows suggest there is still room to sell into the event. The strongest flow last week was leveraged accounts taking profit in long USDJPY. Selling EUR and buying Asian FX are the strongest underlying trends.Citi: Regional Summaries
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G10 – Selling of USD and buying of JPY was the most notable flow last week (profittaking). Flows indicate further EUR selling remains a trend.
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Asia — Pick up in inflows from both real money and leveraged clients led tooutperformance of the region to broader EM. KRW, MYR, PHP and THB saw net inflowswhile SGD and IDR saw outflows.
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CEEMEA — After a sharp reduction of CEEMEA FX longs, leveraged accounts havestabilized their aggregate FX longs in the region. Real money accounts have correctedtheir aggregate CEEMEA FX longs over the past weeks to a small long now.
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LATAM — Real money flows were close to flat across Latam this week. Leveraged clientactivity picked up, with outflows in BRL and MXN, and inflows into CLP and COP.
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