26 February 2018 at 8:28 GMT
- Speculators maintained a near-unchanged dollar exposure
- The JPY surprisingly remains the most shorted currency ahead of the dollar
- Leveraged funds extended short bets in Eurodollar, 2s and 5s
Leveraged funds extended short bets in EURUSD on the back
of strong CPI data. Photo: Shutterstock
By Ole Hansen
Speculators maintained a near-unchanged dollar exposure against nine IMM currency futures in the week to February 20. Sterling’s renewed weakness led to a halving of the net-long; as a result it dropped behind both the CAD and AUD on the leaderboard of most-preferred currencies.
The JPY surprisingly remains the most shorted currency ahead of the dollar. The rally this month has so far only triggered a relative small amount of short-covering. Last week, a 6% reduction was driven by equal measures of short-covering and new longs.
However, the conviction rate among traders about the short-term direction has been falling for the past three weeks. During this time the gross position, being the sum of long and short positions, has fallen to a six-month low.
Leveraged funds extended short bets in EURUSD as well as two- and five-year bond futures on the back of strong CPI data that saw yields move towards multiyear highs.
A reduction of the 10-year net-short and light buying of ultra-long bonds ensured an almost unchanged position on the week when measuring the exposure in dollars per basis point. It moved from -147.1 to -146.6 million USD/basis point.
A second week of heavy selling across the major stock index futures triggered a combined leveraged fund short of almost $27 billion, the second-highest short exposure seen during the past 12 months.
— Edited by Gayle Bryant
Ole Hansen is head of commodity strategy at Saxo Bank