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Futures predict cash-strapped New Year

Big bets recently, on three-month eurodollar futures, indicate that dollars could turn out to be in short supply when many banks and corporations seek refunding at New Year.

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Referring to data from Refinitiv, news agency Reuters has noticed an unusually big activity spike in the market for eurodollar futures. Last Thursday, 19 August, open interest in the December 2021 contract reached 1.15 million contracts, the largest since December 2011. Big volumes on the Thursday included one huge block of 200,000 contracts – possibly a bet that the SOFR benchmark interest rate will be pushed up by year-end funding pressures.

It is the volumes that are uncommon. In itself, the pattern of rising dollar demand towards the end of the year is typical, “with portfolio rebalancing and fund transfers requiring currencies like the euro and sterling to be converted to the U.S. currency,” Reuters explains.

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