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UBS Research – FX Flows: USD weakness not echoed in flow data

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A mixed picture…

The theme of the week was broad based dollar weakness, but USD flows were less clear-cut showing a more or less flat picture (Figure 1). Despite the notable 3% rally in spot EURUSD over the week, EUR actually saw the second largest outflow in G10 after NZD. Yen flows were more in-line with price action, with noticeable JPY inflows helping reverse the entire USDJPY rally following the BoJ’s NIRP announcement, and leaving the pair down 3.4% on the week. Sterling topped the G10 chart in terms of net inflows, with hedge funds recording the 10th consecutive week of net GBPUSD buying – a record since we began compiling FX flow data. In EM, the picture was also mixed with TRY, SGD and ZAR seeing notable net inflows, whilst HKD, BRL and CZK were net sold.

FX Flows & Turnover

EURUSD: In a similar pattern to the last two weeks, EURUSD was again aggressively sold by hedge fund clients. Asset managers and corporate clients were net buyers as private clients moderately sold the pair, but on the whole EURUSD was sold.

USDJPY, EURJPY:  USDJPY was strongly sold by asset managers and hedge fund clients, and to a lesser extent by corporates. Private clients were net buyers of the pair but on the whole USDJPY was decisively sold. EURJPY was more or less flat with some hedge fund buying being offset by asset managers selling.

GBPUSD, EURGBP: GBPUSD was bought by all groups except private clients, who marginally sold the pair. EURGBP was sold by all client groups except hedge funds who modestly bought the pair. On the whole sterling saw good demand and was net bought versus both USD and EUR.

USDCHF, EURCHF: CHF flows lacked clear directionality. EURCHF was flat for all intents and purposes, with modest hedge fund inflows being offset by corporate client outflows. USDCHF was slightly net sold on the back of asset managers and private clients.

USDCAD, AUDUSD, NZDUSD: CAD saw a third week of inflows, primarily on the back of hedge funds, and with some participation from corporate clients. Both Aussie and Kiwi were net sold, with hedge fund clients again leading the charge as other clients showed limited directionality.

EURNOK, EURSEK, USDNOK, USDSEK: SEK saw good demand against both the EUR and the USD, helping it claim the second position in the G10 flow score card. Asset managers were noticeable buyers of SEK against both EUR and USD. NOK was net sold versus the EUR, mostly as a result of hedge fund flows, and was flat versus the dollar.

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