Despite falling more than 7% since April 21, currency traders, collectively, are continuing to bet on further Australian dollar strength.
According to the latest Commitment of Traders report released by the US Commodity Futures Trading Commission on Friday, leveraged investors held net long Australian dollar positions totaling 37,800 contracts as at the close of business on May 10, down 12,400 contracts in the prior corresponding report.
In dollar terms, this equates to net long Aussie positioning of US$2.8 billion, down US$1 billion on the previous week.
Net positioning is simply the sum of all short positions against the number of long positions held, with a positive figure indicating that traders, collectively, are positioned for Australian dollar strength.
The chart below, supplied by ANZ, reveals net Australian dollar positioning among leveraged investors, overlaying the results against movements in the AUD/USD spot price.
Despite recent weakness in the Aussie, the majority of traders are expecting, or perhaps hoping, that the decline will reverse in the period ahead based of current positioning.
Irene Cheung, senior FX strategist at the ANZ, suggests that the number of long Australian dollar positions likely fell in the latter parts of last week given renewed weakness in currency.
“In response to the RBA’s downgrade of inflation outlook, speculative funds took out US$1bn of net AUD longs to US$2.8 billion, the lowest net AUD longs in four weeks,” wrote Cheung. “Price action post the cut-off date suggests a further pare-back in net long AUD positions.”
In overall terms, leveraged investors continued to bet against the US dollar, adding US$0.8 billion in net short positioning for the week. At US$3.7 billion, net short positioning in the US dollar now stands at the highest level seen since mid-2014.
The chart below, again supplied by ANZ, reveals current total positioning in the US dollar against the euro, Japanese yen, British pound, Swiss franc and the Canadian, Australian and New Zealand dollars.
And here’s a table of movements in each currency seen last week.