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US Dollar Bullish Bets Fall As Risk Aversion Rises

Bullish bets on US dollar slipped from $28.79 billion to $25.27 billion against the major currencies in the previous week, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to January 12. US manufacturing contracted in the last month of 2015. Economic reports and falling global equities during the week indicated global growth is slowing and risk aversion is on the rise. This doesn’t bode well for US inflation prospects and investors are reviewing the likelihood of the 100 basis point rate hike scenario for 2016 based on Federal Reserve December meeting dot plot. Federal Open Market Committee minutes released during the week revealed the decision for interest rate hike was a “close call” for some policy makers who were concerned about considerable risks for their inflation forecasts. At the same time several of them stated that Fed’s monetary policy will depend on economy’s performance over time. The December jobs report showed a big jump in nonfarm payrolls to 292000 from 252000 in November, confirming continued improvement in labor market. But average hourly earnings fell in December, which casts doubts on expectations of inflation recovery. Combined with continued slide in commodity and oil prices and slowing Chinese economy these developments support the dovish view of US monetary policy. And as the resulting lower risk appetite drove yields of safe haven Treasury bonds lower and increased demand for safe haven yen investors cut further US dollar bullish bets. As is evident from the Sentiment table, sentiment improved for all currencies except for Australian dollar and Swiss franc. And the yen and Swiss franc are still the only two major currencies held net long against the US dollar.

The bearish euro sentiment moderated as the weekly pace of narrowing of net short bets in euro increased over fivefold to $1.7bn compared to the past week, amounting to $19.85bn net short bets. Euro’s share edged up to over 78% of long US dollar position. The euro net short position fell as investors reduced both short and long positions: by 3695 and 17887 contracts respectively. The bullish Japanese yen sentiment intensified as net long bets rose at past week’s pace of $2.2bn to $2.6bn. Investors increased the gross longs by 10914 contracts and covered shorts by 10349. The sentiment improved marginally for the British Pound with the net short position narrowing by $46 million to $2.75bn. Investors cut both the gross longs and gross shorts.

The Canadian dollar bearish sentiment continued to improve with the net short position narrowing by $151 million to $4.15bn, still remaining the second largest held net short after euro. Investors cut both gross shorts and gross longs. The sentiment deteriorated toward the Australian dollar with net short bets widening by $0.6bn to $1.6bn. Investors increased both gross shorts and gross longs. The sentiment towards the Swiss franc deteriorated marginally as the net long position narrowed by $34 million to $414million. Investors cut both the gross shorts and gross longs.


commitment of traders

commitment of traders net long short

commitment of traders weekly change

market sentiment ratio long short positions



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