During the months of March and April, when there was a lot of uncertainty about the Covid-19 crisis, investors took refuge in monetary funds denomintaed in dollar currency.
After accumulating more than 1 billion euros in tickets in just 3 months, now the opposite is happening: investors are gradually leaving the greenback.
Those who at the end of February already saw the crisis coming, bought monetary funds in dollars, avoiding the heavy losses of the crisis. They were the first to come out of the market, and they did well.
Finally, there are those who pay for the broken dishes: once the crisis was discounted in price and with the drops about to end, many investors, due to the uncertain situation, decided to shelter in monetary assets. In the graph, they would be the ones that bought monetary funds in dollars during the month of April. It was too late to avoid losses.
Now that the worst part of the crisis is over (or at least we think so), all those investors who jumped off the boat are returning to it. Now we are seeing how, during the month of June and, probably, during the month of July, we are seeing outflows of monetary flows in dollars.
Despite the fact that the crisis still generates uncertainties, investors are gradually returning to riskier assets, such as equities and high yield fixed income.
The carry effect favorable to the dollar (compared to the Euro) that we have had during these last six years seems to be ending. The lowering of the FED rates causes some investors (who previously had dollars due to the wide interest differential) to switch to Euros. The American elections, with Democrats leading the polls, may have a lot to do with the ensuing weakness of the American dollar.
