Year-end flows in play but what does it all mean?

There's currently a lot of noise about "year-end flows"

So here's a quick guide to what the market understands the term to mean and potential impact

At the end of the calendar/financial year, there is a process that always needs to be completed. This takes into account company profit and loss from the year and the net need for currency purchase/sales accordingly

Firstly we should note that with the Xmas and New Year holiday period approaching these flows are already happening

They appear to be mostly USD positive thus adding to the impact of the FOMC rate hike so we need to be careful and look beyond year-end therefore with regard to the real hike effect on US$ value

It's not possible to know precise amounts or indeed when they will come to market so it's not an exact science unfortunately

Best counsel I can offer is to keep an eye on the movement/price action around daily fixings and if we get a sudden jerk higher or lower in that time, or indeed outside of it, then you can assume this is order driven related to year-end book squaring

Yes it confuses the real picture at this time of year, and yes you're right to be scratching your head intra-day from time to time but it's all part of the forex market fragility.

If you have any specific questions on this subject I will endeavour to answer them.