IFC Markets - Analytics

    IFC Markets

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    Decline in US dollar net longs continues

    US dollar net long bets slipped to $8.30 billion from $12.6 billion against the major currencies in the previous week, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to February 16. The dollar bullish bets were reduced amid continued global stocks selloff and falling commodity prices. Federal Reserve Chair Janet Yellen’s testimonies to US Congress and Senate Financial Services and Banking committees did little to bolster market sentiment undermined by concerns about slowing global growth. She highlighted higher risks for US economy such as tighter credit markets, volatile financial markets, and uncertainty over Chinese economic growth. Though Yellen said the central bank was unlikely to reverse its plan to raise interest rates further this year, market participants have downgraded the likelihood of further rate hikes this year in the light of increased risks to US economic growth as acknowledged by policy makers too. This has diminished the attractiveness of the US dollar as expectations of no further hikes means that estimates of anticipated higher yields for US dollar deposits made after Federal Reserve convinced the markets it was embarking on a path of raising interest rates are being revised downward. Accordingly the dollar bullish bets are being reduced resulting in strengthening of other major currencies. As is evident from the Sentiment table, sentiment improved for all major currencies. And Australian dollar has joined the Japanese yen as one of two major currencies held net long against the US dollar.

    The bearish euro sentiment continues to moderate with net short bets narrowing by $2.2bn to $6.7bn. The euro net short position fell as investors reduced long positions and covered shorts by 637 and 15746 contracts respectively. The Japanese yen sentiment continued to improve as falling oil prices and global equity rout increased demand for safe haven yen. The net long bets in Japanese yen rose by $0.5bn to $5.2bn. Investors increased both the gross longs and gross shorts by 8707 and 4038 contracts respectively. Sentiment was stable for the British Pound with the net short position narrowing by $42 million to $3.24bn. Investors increased both the gross longs and gross shorts.

    The bearish sentiment moderated for the Canadian dollar with the net short position narrowing by $0.4bn to $3.25bn. Net short bets in Canadian dollar are still the second biggest after bearish bets in euro. Investors increased the gross longs and covered shorts. The sentiment toward the Australian dollar continued to improve at a slower pace as a $0.59bn build in bullish bets swung the $0.3bn net short position into a $0.19bn net long. Investors increased the gross longs and cut the gross shorts. The sentiment improved also for the Swiss franc with net short bets falling by $0.3bn to of $0.5bn. Investors covered shorts and cut gross longs.

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