Date: 29 Mar 2018
Due to Friday’s public holiday, end of month (and in this case end of quarter) currency flows will go through on Thursday as 2018’s last business day in March for North America and much of Europe. But what might forex traders expect, bearing in mind too that those currency flows will be going through in a pre-holiday market where liquidity might not be quite as deep as would usually be the case? Traders will have their own opinions on this but there is an argument that with US equity markets having underperformed in March as compared to other stock markets, equity fund managers who have to keep to a set of percentage benchmark holdings might have to pick up US equities and reduce exposures elsewhere in order to keep their portfolios in balance. Such a process would normally be US dollar-supportive.
Of course there aren’t just equity portfolio realignments to consider when it comes to judging the tone of month- and quarter-end currency flows, but for traders who do feel global equity market portfolio adjustments will exercise a material influence on this occasion, might it not be possible that this time such capital moves will be into, and not out of, the US dollar?
Written by Neal Kimberley, External Currency Analyst.