The reason holdings in carry currencies have not been rising as quickly is because investors remain exposed in a variety of currencies irrespective of their yields. As shown in a previous theme, the EUR and CNY have been the best performers in the past year, despite EUR negative interest rates.
In iFlow Chart we present a weekly update of each economy’s FX, equity and bond flow and holdings. We find large long holdings in CHF, GBP, JPY, BRL, MXN, CZK, HUF, ILS, PLN, IDR, INR and SGD. On the short side of FX holdings are COP, PEN, RUB, TRY, PHP and THB.
The combination of (under) holdings and (in) flow in iFlow Cloud support long exposures in CNY, THB, NZD, COP, CLP, ZAR and TRY. Short positions in currencies (over) held with (out) flows would be CHF, JPY and TWD.
The large number of long exposures emanating from our flow and holdings framework overwhelms the shorts. This is in line with a clear signal out of iFlow Hedge showing investors are hedging FX exposure in their equity portfolios in the US. Even though the bias has been toward buying US equities for over a month, investors are also selling USD along these positions. .
The other main additional exposure prevailing across iFlow is a relentless trend to sell US Treasuries and buy US corporate debt. Fed policies since the Great Lockdown are likely the key catalyst for this behavior.
Otherwise, in equities we are seeing unequivocal demand for international stocks in the UK, Europe and its periphery. These are on top of Brazil, China and India equity longs.