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Foreign Exchange

IMM: CAD net long gains at the expense of AUD

Currency speculators on the CME have cut Australian dollar long positions to their lowest level since the start of the year, as the Canadian dollar draws more attention from the speculative community.

The latest Commitment of Traders report, issued by the Commodity Futures Trading Commission, shows that the net long position in the AUD fell by more than 10,000 contracts. The net long in CAD rose by nearly 6,000 contracts. At 49,000 contracts, with a notional value of $5 billion, the net long position in AUD remains the highest of the IMM currencies, followed by the net long in CAD at 29,000 contracts with a notional value of $3 billion.

However, the trend of recent IMM reports indicates that the gap between the two currencies looks set to narrow.

“This week’s gain in CAD suggests that the trend established since mid-January, namely a continued build-up in gross longs combined with short covering, is likely to be maintained,” said Camilla Sutton, chief currency strategist at Scotiabank.

“Conversely, the trend in AUD positioning is more bearish as longs are paring back their bullish bets while shorts continue to add to theirs,” she added.

 
        Source: Scotiabank

 

Stronger Canadian jobs data during the reporting week, and a better economic outlook for North America relative to Europe, might explain the build-up in CAD bullishness. AUD on the other hand has suffered from the recent string of poor data and signals from the Reserve Bank of Australia that have heightened speculation for a rate cut next month.

Concerns over slower growth in China and the impact this would have on the Australian economy are also likely to lie behind Aussie bearishness.

Elsewhere, investors with short positions in euros continued to lose patience in a resilient spot market. The EUR net short reduced to 79,000 contracts with a notional value of $13 billion – its lowest level since November 2011.

 
        Source: Scotiabank

Last week’s report shows bearish positioning in sterling has also narrowed. While asset managers remain heavily short sterling, leveraged funds continue to add to the GBP longs, having flipped from being net short to net long at the end of last month. Short positions among leveraged funds are now at their lowest level in more than a year, according to the CME.

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