📝 Saw Hedge Funds Reducing MXN Longs On Thursday: UBS Strategy

USDMXN found a bid on Thursday. The desk saw hedge funds likely reducing MXN longs. Stocks found a floor and when they turned bid, USDMXN fell back to the 18.38 level (from 18.45 highs).

In forwards, THE was lower on the inflation print before seeing a brief move higher on the Banxico minutes. Eventually things settled down.

In basis, lm and 2m seem high, and funding went bid (1w much higher). However, from 6m on, basis feels heavy and there is a pronounced downward slope (34 -6, 6x9 -5, 9xly -7 in basis spreads). Think selling 2m with a view to buy them back around month end makes sense.

In G10FX, we have seen real money selling AUD/USD on Friday early EU session. Noticed front-end USD/JPY hedge fund demand for downside protection as BoJ Governor nominee Ueda delivered remarks on YCC normalization. - UBS Strategy