Last Tuesday the Australian dollar suffered its largest one-day percentage loss against its US counterpart in nearly five years, tumbling more than 2% following the Reserve Bank of Australia’s decision to cut interest rates to a record-low level of just 1.75%.
Despite the bearish price action, and the prospect of more cuts to come, it wasn’t enough to sway many currency traders with net long Australian dollar positioning remaining near multi-year highs, according to the latest commitment of traders report released by the US Commodity Futures Trading Commission (CFTC).
Net positioning is simply the sum of long Australian dollar positions against the number of short positions held during the same period.
Although the data is only for leveraged investors, it provides an indication as to sentiment towards the currency across the broader currency market.
According to the data, net long positioning in the Aussie fell by 8,700 contracts to 50,200 contracts, representing a dollar decline in long positions of $800 million.
The chart below, supplied by ANZ using the CFTC data, provides an excellent example of current positioning in the Aussie, tracking its changes against movements in the spot price.
The report is a snapshot of positioning at the close of business on Tuesday last week, so the data does not capture the fallout from the latest inflation forecasts offered by the RBA in its quarterly statement on monetary policy released last Friday. That saw expectations for further rate cuts surge, hammering the Australian dollar as a consequence.
Khoon Goh, senior FX strategist at the ANZ, suggets that “expectations of further rate cuts by the RBA will likely see net long positions in AUD reduced further” when the next CFTC report is released on Friday.
In the interim it’s clear that currency speculators still hold significant long Australian dollar positions, something that may lead to an even steeper selloff should continued weakness in the currency force some traders to cover their losing of less-profitable positions.