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Foreign Exchange

IMM: JPY net short surges; rising interest in FX

Currency speculators on the CME added to shorts positions in the JPY, doubling the aggregate net short position to levels not seen in almost a year, according to the CFTC’s latest Commitment of Traders report.

The JPY net short held by the speculative community increased from 19,000 contracts to 42,000 during the period March 6 to 13, reflecting the rise in USDJPY, which has been driven higher towards ¥85 by rising US yields. However, only 44% of open interest in JPY is held by leveraged funds, with JPY seemingly driven more heavily by real money and commercial flows in comparison to other G10 currencies. Indeed, leveraged fund positions seem to follow the price action with a time lag, says Greg Anderson, FX strategist at Citi in New York.


 USDJPY vs IMM leveraged funds' net position
 
 Source: Citi

The report, issued on Friday, also shows that the hedge fund community increased its overall interest in FX, but without any sizeable imbalance. IMM leveraged funds added to both long and short sides of EUR, AUD, GBP and CAD. The data show that IMM leveraged funds’ EUR shorts have been in decline after peaking in late January but rose last week by 17,000 contracts with a notional value of $1.1 billion. At the same time, EUR long positions also increased by 4,600 contracts with a notional equivalent of $0.8 billion, meaning there was little change in overall balance.

“At the present juncture, positioning does not seem to be a major impediment to EURUSD moves in either direction,” says Anderson.

A similar story can be told for the Commonwealth currencies, with leveraged funds adding to both the long and the short side of AUD, GBP and CAD. While open interest in GBP and CAD are far from record levels, the latest report underlines AUD’s growing popularity as a trading currency among the speculative community.

The short side of AUD reached a new record, while long positions were at 96% of the record set two weeks ago.


Current and maximum position of IMM leveraged funds by currency 
 Source: Citi
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