Bank of America Global Research has conducted a time-zone analysis to review the performance of FX in 2022. This study divided a 24-hour day into 3 distinct time zones: Asian hours from midnight GMT to 8am GMT, European hours from 8am GMT to 1pm GMT, and US hours from 1pm GMT to midnight GMT. Subsequently, BofA calculated the total gains for the year in each time zone.
European investors have accumulated a large holding of USD positions since 2022, which they have yet to relinquish. As the Federal Funds Rate moves closer to its endpoint, we could experience an increase in USD supply during the trading hours of Europe in 2023, as suggested by BofA.
Analysis of daily FX spot activity broken down by time zone has indicated that during the first three quarters of 2022, the USD experienced a significant rally against G10 FX largely during European trading hours. Conversely, in the fourth quarter of 2022, USD selling was driven predominantly by US trading hours. BofA observed that despite US investors taking a bearish stance on the USD in the final quarter, changes in price during European trading hours were less pronounced.
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