Currency Speculators Went Fishing

The summer lull for speculators in the currency futures market continued in the CFTC reporting week ending August 23.  Of the 16 gross currency futures positions we track, speculator adjustments were less than 3k contracts in all but three.

The bears added to their gross short sterling position for the eighth consecutive week.  The seven hundred contract increase was the smallest of the streak and lifts the gross short speculative position to 130.8k contracts, a new record.

More substantive adjustments were seen in the euro and Mexican peso, where the speculative bears ran for cover.  The gross short euro position was trimmed to 182k contracts, as 13.6k contracts were covered.   It is the fourth week in a row that shorts were covered.  They peaked at 221.8k before the short-covering streak.   The speculators covered 14.9k gross short peso contracts, leaving them with 55.4k.  It is the third week of short-covering that began with a gross short position of 76k contracts.

Despite the small changes in the gross positions by speculators, two pattern were clear.  First, speculators did not reduce the gross long positions in any of the currency futures we track.  Second, speculators mostly reduced gross short positions.  The exceptions were sterling, as we have seen, and the Australian and New Zealand dollars.   We suspect some of the late positioning was caught wrong footed and may help explain the dramatic reaction of Yellen (and Fischer) before the weekend.

Speculators in the 10-year Treasury futures moved to the sidelines.  The bulls liquidated 12.7k contracts, leaving them with 565.7k contracts.  The bears covered 34.5k contracts.  The gross short position now stands at 517.3k contracts.  Despite the gross position reductions, the net position, which conventional analysis focuses on, increased to 48.4k long contracts from 26.6k the previous week.

Speculators also moved to the sidelines in the light sweet crude oil futures contract.  The longs cut 15.2k contracts to 555.0k.  The shorts bought back 61.4k contracts, leaving them with 201.3k.  The net position rose by 46.2k contracts to 353.k.

23-Aug      Commitment of Traders
Net  Prior  Gross Long Change Gross Short  Change
Euro -76.7 -92.5 105.4 2.3 182.6 -13.6
Yen 60.3 56.0 90.4 2.1 30.1 -2.2
Sterling -95.0 -94.2 35.9 0.0 130.8 0.7
Swiss Franc 1.9 -1.5 20.9 0.9 19.0 -2.5
C$ 16.7 12.5 50.1 4.0 33.4 -0.3
A$ 42.8 41.1 71.0 2.1 28.3 0.4
NZ$ -0.9 -0.7 29.9 0.9 30.8 1.1
Mexican Peso -28.5 -45.7 26.8 2.3 55.4 -14.9
(CFTC, Bloomberg) Speculative positions in 000’s of contracts

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