A fund holding foreign equities hedges the currency exposure with forwards sized to the value of the holdings. When those holdings change in value over a month, the hedge no longer matches and has to be resized. The adjustment is mechanical, unrelated to any view, and it is executed around the same time by many institutions at once.
The direction is predictable in principle. If foreign equities rallied strongly, hedges are too small and more foreign currency must be sold, and the reverse after a fall. Banks publish estimates of the expected flow in the days before month end.
Because most of it is transacted at the london-fix, the last half hour of a month often shows a move that reverses shortly afterwards, which traps people who read it as a fresh trend.
Example: a fund holds $5bn of US equities hedged at the start of a month. US equities gain 4% while the fund's own currency is unchanged, so roughly $200m of extra dollars must be sold at the fix to restore the hedge.
Related: london-fix, currency-hedging, spread-widening, mid-rate