IFC Markets - Analytics

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    US Dollar Long Bets Decline as Lower Risk Appetite Persists

    US dollar net longs position contracted further to $25.05 billion from $25.27 billion against the major currencies in the previous week, according to reports on speculator position changes based on Commodity Futures Trading Commission (CFTC) data covering up to January 19. Concerns about slowing global economic growth weighed on investors' risk appetite which followed gyrations in oil prices and uneven performance of China’s stock market. Economic data during the week didn’t provide much support to US dollar, indicating US retail sales in December fell 0.1% on month, as well as lower export, import prices and producer price index. The industrial production recorded another monthly contraction, the third in a row, albeit at a lower rate of 0.4% compared with a 0.9% drop in November. While declining gasoline prices contributed to weak sales reading, falling sales indicate soft consumption spending which is pointing to a weak growth performance for the fourth quarter GDP. On the plus side consumer confidence in December as measured by Michigan consumer sentiment index rose, reflecting continued improvement in labor market. Investors cut the US dollar bullish bets marginally to the lowest level in four months amid ongoing global market turmoil and resulting higher risk aversion. As is evident from the Sentiment table, sentiment improved for the euro and yen. And the yen and Swiss franc remain the only two major currencies held net long against the US dollar.

    The bearish euro sentiment moderated further at a slower pace with the net short bets narrowing by $1.16bn to $18.68bn. Euro’s share edged down to about 74% of long US dollar position. The euro net short position slipped as investors covered shorts and increased long positions by 3149 and 6287 contracts respectively. The bullish Japanese yen sentiment intensified as net long bets rose at about half the past week’s pace, rising by $1.3bn to $4.0bn. Investors increased the gross longs by 6100 contracts while they covered shorts by 15466. The change in sentiment turned negative for the British Pound with the net short position widening by sizable $0.6bn to $3.4bn. Investors increased both the gross longs and gross shorts.

    The bearish sentiment intensified also for the Canadian dollar with the net short position rising by $0.4bn to $4.55bn, still accounting for the second-largest net short bet after euro. Investors cut the gross longs and increased gross shorts. The sentiment toward the Australian dollar continued to deteriorate at a higher pace with net short bets widening by $0.89bn to $2.5bn. Investors cut the gross longs and increased gross shorts. The sentiment towards the Swiss franc deteriorated significantly as the net long position narrowed by $0.3bn to $113 million. Investors increased both the gross shorts and gross longs.

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