BofA’s month-end rebalancing model points to demand for the likes of the euro, sterling, and yen with dollar flows set to be more neutral in general. Their model works off a conventional 60/40 equity/bond portfolio and flows are estimated by comparing asset performance across countries.
That suggests inflows into the euro of about +1.0δ, backed by the relative underperformance of European stocks this month. Similarly, the model points to inflows of about +0.9δ in the pound amid the lagging performance of UK assets. At the balance, the model also indicates moderate inflows into the yen currency of about +0.6δ, citing softer Japanese asset performance against its peers.
The bulk of the selling is indicated for emerging market (EM) currencies, according to BofA. They see outflows of around -1.5δ amid stronger EM asset performance earlier this month. As for the dollar, the flows are largely more neutral with just marginal outflows of around -0.2δ indicated.
