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Speculative positions show no belief in JPY intervention

Danske Research Team from Danske Bank A/S at 12/01/09


The latest IMM data cover the week from 17 to 24 November.

The IMM report was compiled just prior to the Dubai-led Thanksgiving sell-off in risky assets. This may explain why speculative investors added significantly to short dollar positions, which at USD19.7bn are becoming increasingly crowded.

Speculative investors mainly added dollar shorts against the yen resulting in an increase in net long JPY positions to 39 percent of open interest. This is very close to the multi-year high seen in February and suggests that the yen has become increasingly sensitive to a position squeeze. A potential driver of such a squeeze could be increased intervention fears (or actual intervention) which could see USD/JPY move sharply higher.

Net long EUR positions were also built further and are now back above 10 percent of open interest. Being long EUR/USD has been a profitable strategy, as the pair has since broken meaningfully above 1.50.

It is not all a one-sided bet on dollar downside, however, as speculative investors have
once again added to GBP shorts. Net short dollar positions against AUD and NZD were furthermore scaled back and are now no longer at the extremes seen a few weeks ago. Hence, the risk to AUD and NZD from a position squeeze appears to have fallen, though longs are still somewhat crowded. The

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