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IMMs: US dollar shorts cut aggressively, but still near historic lows

The US Commodity Futures Trading Commission’s latest Commitments of Traders report has shown an aggressive pruning of short US dollar positions, based on International Money Market data.

This mirrors a rebound in the US dollar last week. However, data for the week May 3-May 10 also confirms that investors still remain overwhelmingly bearish on the dollar. Net short dollar positions are still at record lows versus a global basket of currencies (see graph).

Dollar shorts were cut savagely, but that still leaves short positioning “excessive” and the dollar near historic lows, said RBC Capital Markets in a research note dated May 13. USD net shorts tumbled from 257,347 contracts on May 3 to 206,478 on May 10, a period that featured a material USD rally.

“However, the USD bounce did come amid a very bearishly tilted market. Despite the decline net shorts remained above 200k for a record 14th week. A relief rally was long overdue,” concluded David Watt, a senior currency strategist at RBC.

In a research note this morning (May 16), Citi focussed on the activity of leveraged fund investors. Leveraged funds are the group most likely to be employing stop loss orders and betting on a market they hold a position in, the bank said.

“The most interesting aspect of this week's data is the fact that leveraged funds' short-USD positions remained large across most currencies. As of Tuesday, the only currencies that had seen major position reductions were EUR and CAD. Other currencies, like AUD, CHF, GBP and MXN had seen almost no position reductions up to that point.”

RBC dollar basket

Source: RBC Capital Markets, CFTC, Bloomberg
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