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Foreign Exchange

Speculators on CME cut long USD positions

Investors on the Chicago Mercantile Exchange have reduced their long exposure to the dollar markedly, as expectations of US monetary policy staying looser for longer weighed on demand for the currency.

Positioning data from the CME showed speculators sold a net $4.9 billion in the week to February 7, leaving the aggregate long position in the dollar at $7.3 billion. That followed a $6.6 billion reduction in the long dollar position in the previous week. The increasing pace of the reduction in long dollar positions has been a reaction to last month’s Federal Reserve meeting. The Fed surprised investors with its dovish stance on January 25, indicating it would extend the period of exceptionally low US interest rates to 2014.

But investors were already trimming long dollar positions ahead of the Fed meeting, with net longs falling two thirds during the past month.

 Net non-commerical positioning in USD

 Source: Bloomberg, Morgan Stanley

The biggest change in positioning was in the Canadian dollar, as investors cut all outstanding net short positions to move into long territory for the first time since September.

In previous weeks, positioning in the Canadian dollar had lagged other commodity-linked currencies, with the Australian and the New Zealand dollars the main beneficiaries from the recovery in risk appetite that has characterised the start of the year.

 CAD positions switch to long

 Source: Bloomberg, Morgan Stanley

Investors also continued to reduce their short positions in the euro, buying a net 16,953 contracts during the week amid rising optimism of a deal over Greek debt.

Still, short euro positions remained close to the record levels they hit on January 24, with positioning as a percentage of open interest standing at 48.7%.

 CME position summary

Source: CFTC, Morgan Stanley 
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