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Foreign Exchange

Euro short positions rise to fresh record highs

Speculators on the Chicago Mercantile Exchange have raised their bets against the euro to fresh record levels, although the pace of deterioration in sentiment towards the single currency showed some signs of abating.

Positioning data from the CME showed the value of the net short position in the euro rose to a new record of $25.5 billion on January 17, however investors added a relatively modest $0.7 billion of bets against the single currency over the week. Furthermore, the figures do not cover the large bout of short covering seen in the euro over the latter half of last week.

Nevertheless, this represented the fourth consecutive week that short positions in the euro have hit record levels, reflecting the concerns in the market over eurozone government debt and also moves by the European Central Bank to loosen monetary policy in the region.

Christine Tian, strategist at Morgan Stanley, said the dominance of euro positioning in the market reflected the heightened levels of concerns among investors over the future of the single currency.

Indeed, short euro positioning as a percentage of open interest rose from 52.7% in the previous week to 53.2%.

“That is near record highs and demonstrates strong investor conviction in the position,” said Tian.

 Short euro positions at fresh highs

 
 Source: CFTC, Data Insight & Scotia FX

  Meanwhile, investors on the CME increased their long positions in the dollar, buying a net $0.8 billion over the week, and taking the value of the aggregate net long position to $18.66 billion.

The market is long against every other currency listed on the CME except for the yen, the Australian dollar and the New Zealand dollar.

 Net long (short) non-commercial positions

 
 Source: CFTC, Data Insight & Scotia FX

  New Zealand dollar buying stood out among mostly small changes in other currency positions , with investors nearly doubling their long exposure in the kiwi.

The yen retained its place as the preferred major currency, with investors sitting on long positions in the currency worth $9.6 billion.

Camilla Sutton, chief currency strategist at Scotia Capital, doubted that investors would extend those yen positions, however.

“Investors remain comfortable being net long of the yen, although increasingly interventionist rhetoric from officials may scare of some investors betting on additional strength,” she said.

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