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IMM: USD short increases to $16 billion as speculators abandon QE currencies

Speculators on the CME sent the USD further into short territory last week after the Federal Reserve’s QE3 announcement, as traders show increasing hesitancy to be long currencies in countries where central banks are buying assets.

The latest Commitment of Traders report, issued by the Commodity Futures Trading Commission, shows the value of the net short USD position at $16 billion – a level not seen since August 2011 – in the week to September 18.

 USD short positions build

 Source: Scotiabank, IHS, CFTC
Net short EUR positions continued to benefit from short covering incentivized by the European Central Bank’s peripheral bond-buying programme, as well as weakness in the USD driven by the Fed’s bond-buying programme initiated on September 13.

The value of the net EUR short position fell to $12 billion, down from $15 billion the previous week and its lowest level since late 2011.

The speculative net long position in the JPY was cut by more than half to $2.4 billion, or by 17,300 contracts to 15,500 contracts, as the yen gained about 0.25% against the USD despite last week’s Bank of Japan QE announcement.

Meanwhile, the GBP flipped into a net long position of $1.4 billion after being held net short for the past two weeks.

Scotiabank chief currency strategist Camilla Sutton says the latest IMM data shows the development of an important trend of traders becoming more hesitant to be long currencies associated with QE moves.

This hesitancy is, in part, fuelling pressure in the AUD, CAD and NZD, all of which saw their net long positions grow again last week.

Of the AUD, CAD and NZD, the CAD long grew the most last week, with speculators adding 10,021 contracts to their net long positions and taking the value of the overall net long position in the loonie to a record $11.5 billion.

 CAD longs at record levels

 Source: Scotiabank, IHS, CFTC

In the CAD, Brown Brothers Harriman’s global head of FX strategy Marc Chandler points out that “speculators in the futures market still cannot get enough Canadian dollars”, even though they had already accumulated a record long net and gross position.