FX Flows Weekly: USD continues to trend towards inflows

Research evidence excerpt

FX Flows Weekly: USD continues to trend towards inflows

Citi’s Take

Citi Flows – USD saw net inflows driven by leveraged and real money accounts.

EM aggregate was on the flip side, with net outflows driven by leveraged and real Weekly avg indexed flows, latest 5 weeks across EM

money. Regionally, Asia was the strongest driver of net outflows, contributed to regions

by leveraged, real money, and banks. CEEMEA flows were close to flat, with

leveraged inflows offset by real money and corporate outflows. LatAm saw net

inflows but with strong two-way flows of leveraged and real money outflows and

bank inflows.

Quant – Flows currently favor PHP, COP & IDR against TRY, CLP & PEN. Currently,

traditional carry is crowded in 3m leveraged and 1m real money flows. Value

positioning is clean across all tenors. Momentum is crowded in 1m real money

flows. Vol-adjusted carry (EMFX 5x5) positioning is crowded in 1m and 3m tenors.

Cross-asset vol is below 4-sigma. In terms of crowded basket at risk from a vol

spike, HUF, ILS & BRL are the most vulnerable, having been net bought by our

investor base. INR, CZK & PLN saw the most outflows over the last six months.

G10 – Our flows indicate moderate USD buying from both leveraged and real

money segments. This was mostly offset by selling of oil-sensitive currencies like

CAD and NOK.

Asia – Investor flows dipped to negative territory in EM Asia, with both real money

and leveraged investors turning to net sellers. CNH experienced notable net

elling from leveraged investors, while IDR saw meaningful inflows from the same

ohort.

EEMEA – EM saw overall outflows in the past week, led by real money investors.

owever, CEEMEA bucked the trend with more balanced flows, with continued

nflows into HUF balanced by outflows from PLN and CZK.