G10FX: EUR likely To Absorb The Lion's Share Of C-Banks FX Diversification - Credit Agricole

Credit Agricole CIB FX Strategy Research discusses the latest reports suggesting that the Chinese demand for UST maybe cooling have sent USD lower across the board as investors started pricing in the prospect for weaker central bank demand for USD-denominated assets.

"While the reserve diversification may support the more liquid G10 smalls like AUD and CAD, even they may struggle during a potential bout of risk aversion. At the same time, liquid majors like EUR and JPY should remain generally supported,

In that, we suspect that EUR would absorb the lion’s share of the FX diversification flows given the superior liquidity of the EGB markets," CACIB argues. 

Source: Credit Agricole CIB Research