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Forex pairs in this Article » EUR/USD (New York) - According to Geoffrey Yu, a Research analyst at UBS, “With broader risk conditions stabilizing, high beta currencies managed to stem the large outflows seen prior, however we suspect it was more of a case of small-scale short-covering rather than fresh longs.”

The CAD was the only currency that found decent interest, led by asset manager and hedge fund selling of the USD/CAD. Meanwhile, the AUD was net sold heading into this week's RBA, led by asset managers and corporate selling. Nordics were still being offloaded as the dollar was strongly bought versus both NOK and SEK, led by hedge funds taking off USD-Nordic shorts.

In another realm, foreign demand for US stocks cooled a little last week, but remains intact despite the FOMC signaling that QE3 tapering could begin later this year. More significantly though, US investors are also now putting their money to work much closer to home. Capital continues to flow westward across the Atlantic, now driven mainly by US investors switching out of Eurozone stocks.

“If this pattern continues on the back of this growth dividend, the EUR/USD is likely to fall gradually towards our end-2013 forecast of 1.2000.” US investors also trimmed their holdings of EM Asia equities as concerns grew about a slower Chinese growth profile and the global consequences of higher US yields.
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