Will dollar flows follow in the session ahead?
The EUR/USD 3-month basis swap has widened to its most since June while the yen-dollar 3-month basis swap has widened to its most since the end of March, with month-end and quarter-end trading in focus over the next two days.
Typically this is seen as funding pressures increasing as players go in hunt for the dollar.
BofA stated a case yesterday here that this year-end may not see the typical dollar demand flows but since 2018, buyers have been a little earlier around late September to October - compared to the November to December period before.
That may perhaps also be part and parcel of the latest move above. However, in any case, this points to some search for the dollar ahead of the month-end and quarter-end, which fits what Citi is arguing about flows into the greenback going into tomorrow.
