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Foreign Exchange

IMM positioning reflects continued eurozone uncertainty

Leveraged funds’ USD long positions were firmly above 100,000 for the fourth consecutive week, while EUR net shorts edged higher as investors remained wary of risks surrounding the eurozone, reveals the latest Commitment of Traders report.

Issued on Friday by the Commodity Futures Trading Commission, the report showed that USD net longs fell only modestly from 114,795 on October 11 to 110,724 on October 18. Meanwhile, the net short in euros edged higher to 77,720 from 73,795, despite European policymakers’ apparent efforts to accelerate plans toward a comprehensive resolution to the crisis.

“Positioning reflects lingering uncertainty about the outcome of the EU summits and efforts to ring-fence the sovereign and financial risk,” says David Watt, senior currency strategist at Royal Bank of Canada.

But other developments do suggest an improvement in overall sentiment. Net shorts in GBP fell for the second week running, from 61,972 to 53,226, while the net long in AUD, a traditional proxy for risk appetite, almost doubled from 10,753 to 20,353 accompanying an AUDUSD climb back above parity.

Net longs in Japanese yen, a currency that has been the beneficiary of large safe-haven flows since June, were also trimmed for the second successive week, from 35,119 to 26,907.

But despite the recent selling interest in JPY, the market’s long position in Japanese yen is still greater than any other non-USD IMM traded currency, measured by both the number of contracts and the dollar value of the contracts outstanding.

IMM Positioning Summary
 
 *Non-commerical net positioning divided by total open
interest for each respective currency
**Max open interest is the largest "as a % of open interest" since Jan 1993

Source: Morgan Stanley, CFTC
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