IFC Markets - Analytics

    IFC Markets

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    US Dollar Long Bets Fall to Their Lowest in Two Months

    Investors reduced US dollar net long bets from $31.8 billion to $28.79 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 5. US manufacturing contracted in the last month of 2015. Dollar long bets hit the lowest since early November. The ISM's Manufacturing Index came in at 48.2 in December compared to 48.6 in November, below the 50 level in the second month in a row. The lower reading highlights the slowing of energy and commodity industries as oil and commodity prices continue falling. The growth in pending home sales slowed in November to 2.7% year-over-year from 3.9% in October. Construction spending also fell in November 0.4% against a 0.3% rise in the previous month. And a slump in global equity markets that followed a sharp decline in Chinese stock markets spurred concerns that The Federal reserve may slow its monetary tightening. Investors reduced the bullish US dollar bets as the possibility of a lower pace of raising the interest rates by the US central bank, and higher demand for safe haven yen with the start of the market turmoil lowered the attractiveness of US dollar. As a result investors turned net long on the yen, which is now held net long against the US dollar together with the Swiss franc.

    The bearish euro sentiment improved as net short bets in euro fell by $0.3bn to $21.5bn. Euro is still making up the bulk of net short bets with its share rising to about 75% of long US dollar position. The euro net short position declined as investors covered short contracts by 23 and reduced the long bets by 116 contracts. The Japanese yen sentiment has reversed and turned bullish as a $2.2bn weekly build of long Japanese yen bets resulted in $0.4bn net long position. Investors increased the gross longs by 22463 and cut gross shorts by 1134 contracts. The sentiment improved also for the British Pound with the net short position widening by $74 million to $2.79bn. Investors increased both the gross longs and gross shorts.

    The Canadian dollar bearish sentiment improved slightly with the net short position narrowing by $95 million to $4.3bn. The Canadian dollar remains the second largest held net short after euro. Investors cut both gross shorts and gross longs. The bearish sentiment toward the Australian dollar continued to improve at a slightly higher pace with net short bets narrowing by $0.3bn to $0.9bn. Investors covered shorts and increased gross longs. The sentiment towards the Swiss franc remained unchanged with the net long position flat at $349 million. Investors cut both the gross shorts and gross longs.

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