Like I mentioned earlier today, most of the market is focussing on expected heavy end-of-month flows from the big institutional asset managers who will be rebalancing after big moves on stock and debt markets worldwide.

Most expect these flows to be USD-negative but the AUD is also expected to come in for some heavy selling. Quite a few hedge funds are already positioned short AUD/JPY to benefit from these flows so if they don’t materialise then we could see a sharp short-covering rally.

For now at least, this is what’s driving movements in the market.