Citi Month end FX hedge rebalancing: FXWW

From the FXWW Chatroom – Citi Month end FX hedge rebalancing model sends a weaker than average signal to sell USD on Friday, March 29. With the exception of USD/JPYselling, the signal falls short of 0.5 historical standard deviations in all crosses.
Our estimated signal to sell USD is 66% driven by government bond investors’ rebalancing needs and 34% by equity investors. In terms of historical standard deviations, the signal to sell USDJPY is strongest at -0.6 stddev, owing to larger allocations to partially hedged foreign bonds among Japanese investors and and weaker performance of JGBs among major markets.
Strong gains in EUR area and UK fixed income indices also mean that foreign investors will likely need to sell EUR and GBP to hedge gains. This reduces the net EURUSD and GBPUSD signals to all but zero.

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