Speculators Trim Long Foreign Currency Exposure in the Futures Market

Over the summer, the US dollar was out of favor with the speculators in the futures market. This means that gross long positions increased and gross short positions tended to fall.  Speculators are only short three of the eight currency futures we track, the euro, sterling and Mexican peso.  

However, in the latest CFTC reporting period ending September 2, speculators liquidated long positions across the board.  The only exception was the highest yielding of the bunch, the New Zealand dollar.  Speculators added 5.5k contacts to the gross long Kiwi position, lifting it to 37.2k contracts.  

The adjustment of gross short positions was more mixed.  Evenly mixed.  Four increased and four rose.  Of note, the for the second consecutive week, the gross short speculative sterling futures position fell.  Still, the gross short position of 128.8k contracts (-3.4k during the latest period) is still substantial relative to its own history and other currency futures.  Speculators only have a larger gross short position in the euro (190.0k contracts)

Position adjustments appear to be picking up from the summer lull.  There were two adjustments by speculators that we regard as significant (10k contracts or more).  The gross long euro position was chopped by 10.9k contracts to 97.3k.  It is the smallest gross long position since the UK referendum. The other significant speculative adjustment was the aggressive push by the Mexican peso bears.  The gross short position surged by 22.1k contracts to 75.2k contracts.  This is the largest jump,in percentage terms, in two years.    

All other speculative position adjustments were less than 6k contracts, exception for the yen bulls. They trimmed the gross long position by 7.6k contracts, leaving 84.0k.  It snaps a five-week accumulation run.  

The battle between the bulls and bears in the US 10-year Treasury note futures turned more intensive in the latest period.  The bulls, still betting on lower yields, added 34.2k contracts to take their gross long position to 657.4k contracts.  Some of these late-longs may have gotten shaken out in the sharp sell-off in the three days since the reporting period ended.  The bears added 30.9k contracts to their gross short position, which stood at 552.6k contracts.  The net long position was nearly flat at 104.8k contracts, which obscures the underlying positioning increase.  

The bears made a stand in the oil futures market.  The gross short position rose to 248.3k contracts, a 51.2k increase.  In percentage terms, it is the largest increase since 2007.  The bulls pealed 4.3k gross long contracts, leaving 534.1k contracts.  The net long position fell for the second week.  In the latest period it fell 55.5k contracts to stand at 285.8k contracts.

6-Sep      Commitment of Traders
Net  Prior  Gross Long Change Gross Short  Change
Euro -92.6 -81.9 97.3 -10.9 190.0 -0.2
Yen 54.5 63.7 84.0 -7.6 29.5 1.6
Sterling -90.0 -92.5 38.8 -0.9 128.8 -3.4
Swiss Franc 1.5 8.2 22.8 -1.7 21.4 5.0
C$ 20.9 22.4 44.1 -2.7 23.2 -1.2
A$ 39.0 42.6 66.2 -4.2 27.3 -0.6
NZ$ 6.1 1.9 37.2 5.5 31.1 1.3
Mexican Peso -58.4 -33.2 16.8 -3.1 75.2 22.1
(CFTC, Bloomberg) Speculative positions in 000’s of contracts

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