Bank of America Highlights US Dollar Strength Ahead of Quarter-End Rebalancing
As financial markets prepare for the critical month-end and quarter-end rebalancing period in late March, a major Wall Street firm is pointing to a clear directional bias. According to Bank of America’s proprietary month-end fixing model, the US dollar is positioned as the favored currency heading into this pivotal trading window. This assessment aligns with similar recent observations from other prominent institutions, including Credit Agricole and Barclays, suggesting a convergent view on near-term currency flows.
Key Currency Predictions from the Model
Bank of America’s analysis quantifies the expected magnitude of institutional portfolio adjustments. The firm’s estimates indicate a significant potential for net inflows into US dollar-denominated assets, measured at approximately +1.0 standard deviations (σ) from typical monthly flows. A smaller, but still positive, signal is seen for euro-denominated assets at around +0.2σ.
Conversely, the model projects pronounced outflows from several other major currencies. Japanese yen assets face the steepest expected selling pressure at roughly -1.7σ. Emerging market currencies are also in the outflow camp at about -1.4σ, while British pound assets are seen experiencing outflows of approximately -1.1σ. This pattern of selling against the yen and sterling notably mirrors the conclusions reached by Barclays’ own independent model, reinforcing the signal’s credibility.
USD/CHF: The Primary Beneficiary?
While the broad dollar strength is the headline takeaway, Bank of America singles out one specific pair for exceptional attention: USD/CHF. The analysts argue that the confluence of factors makes the Swiss franc the most likely major currency to weaken substantially against the dollar during the rebalancing process.
“The direction of travel clearly suggests strong USD/CHF buying, driven primarily by the sharp drawdown in US equities. With bond returns also posting negative returns, we think this could be one of the larger USD/CHF buying months of the year. The signal has been consistent enough for us to have confidence in the direction of flows,” the BofA note stated. The underlying logic is that typical rebalancing flows into USD assets are amplified by the current environment of negative returns in both US stocks and bonds, increasing the relative attractiveness of holding dollars over francs.
Technical Context and Market Momentum
The fundamental flow projections are supported by recent technical price action in USD/CHF. The pair gained 1.4% last week, demonstrating strong momentum. More significantly, it broke above its 200-day moving average—a key long-term trend indicator—at the end of the week. This move placed USD/CHF above both its 200-day and 50-day moving averages simultaneously for the first time since March 2025, a notable technical shift that could encourage further momentum-based buying and validate the fundamental rebalancing thesis.
Traders and investors will be watching the 0.8000 resistance level closely in the coming days. A decisive break above this psychological and technical barrier could open the path for further gains, consistent with the large-scale portfolio reallocation suggested by the Bank of America model.
