The worst one market does relative to another, the more asset managers need to buy the currency of the under -performer.
US shares have far out-performed European shares this month amid the sovereign debt crisis, so at month-end, index funds need to sell the “extra” dollars in their portfolios and buy EUR to get back to their benchmarks.
Given the amount of chatter today of EUR demand, I’d expect the exposure to have been front-run to a great degree by the market.
EUR/USD trades at 1.3310 after stalling in the mid-13330s, where several central banks were spotted selling. Not surprising, given their massive purchase in recent sessions.
