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Blame Currency Trading’s ‘Soul Destroying' Start to 2019 on Reserve Managers

  • Central banks rotated holdings from dollars to euros last year
  • Euro demand raises hurdle for volatility breakout: JPMorgan
Pedestrians walk past a currency exchange store in Hong Kong, China.
Photographer: Anthony Kwan/Bloomberg

Central banks’ shifting currency reserves may be to blame for what JPMorgan Chase & Co. is calling one of the most frustrating quarters ever for currency traders.

Reserve managers pared their allocated holdings of dollars to the lowest level since 2013 at the end of last year, while boosting their euro allotment to the highest since 2014, the International Monetary Fund said in a report last month. That rotation helps explain the tight range in the euro-dollar exchange rate -- the world’s most actively traded pair -- and the “soul-destroying” inertia in major currencies, according to JPMorgan.