Speculative investors remain dollar bearish

Danske Research Team from Danske Bank A/S at 10/26/09

 

The latest IMM data cover the week from 13 to 20 October. Speculative investors added further to short dollar positions following the recent accelerated sell-off in the greenback. Hence, dollar shorts remain significant, albeit not quite at the stressed levels seen prior to the financial crisis. Sterling posted a strong rebound last week, taking GBP/USD close to 6 percent higher, as among other things the Bank of England minutes helped to ease fears about a further relaxation of monetary policy. As a result, speculative investors scaled back short Sterling positions to just above 20 percent of open interest. However, GDP numbers released on Friday surprisingly showed that the UK did not escape recession in Q3 and caused a renewed Sterling sell-off – likely implying that GBP shorts have been rebuilt. While overall USD shorts were extended slightly, speculative investors reduced long EUR positions. However, following the collection of IMM data EUR/USD has broken above 1.50 and there are generally few price indications that investor sentiment is shifting away from further upside. NZD, AUD, and CHF remain most at risk from a swing in speculative positions, as longs in these currencies are generally crowded at above 40 percent of open interest. Especially NZD longs appear crowded.