The way these month-end book rebalancings work is a bit counter-intuitive. You’d think strong capital markets would require investors to buy the currency, but the reverse is true.
The S&P was the best performing big stock index in the developed world this month, up over 9%. At month-end, passive investors like foreign index funds and ETFs need to sell the “extra” nine percent of dollars they accrued over the month to get back to normal weightings.
Some of that demand will be offset by the large EUR/GBP sell order noted in our previous post but the EUR should find seasonal demand up until the 15:00 GMT level, at least.
EUR/USD trades now at a firm 1.3662 level.
