IMM CFTC: Fed signal reduces dollar longs by one third

The combination of an overstretched record short EUR position and the recent announcment by the FED regarding (low) interest rates and the potential for QE3 triggered a round a long dollar liquidation in the week to last Tuesday.

The latest Commitment of Traders report from the CFTC showed that the aggregate long dollar position versus the eight currency futures traded on the IMM dropped by a sizeable 6.5 billion dollars, a 35 percent reduction on the previous week. Traders have been net long dollars since September 2011.



That it was most about investors perception of the dollar was reflected in the fact that all other currencies apart from CAD saw increased demand, especially AUD and JPY.

Investors maintained their bearish views on the EUR with the short position remaining entrenched and despite the recent rally back above 1,3000 we have only witnessed some hesitant short covering. Last week the general dollar weakness triggered buying of 13.8k EUR contracts which reduced the record short position by 8 percent to EUR 19.7 billion. The conviction rate, which is the total longs share of open intererest, remains high at 52%.

Investors continued to accumulate AUD with the long position increasing by 10 percent to a new 25-week high. The conviction nugded up to 52 percent despite the currency being very close to overbought territorry.

Positioning in CHF and CAD were broadly unchanged while JPY longs climbed back towards recent highs as the currency rose back towards its 2011 high versus the dollar.

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