FX traders are betting on further Japanese yen strength

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FX traders around the world are turning cold on the US dollar, reducing their net long positioning to lows not seen since the middle of last year.

According to latest trade reports released by the US Commodity Futures Trading Commission last week, net US dollar positioning among leveraged investors fell to just $0.8 billion as at the close of business last Tuesday, the lowest level recorded since July 2015.

Net positioning is simply the sum of all long positions versus the sum of all short positions in any given currency.

The chart below, supplied by ANZ using the CFTC report, reveals the sharp reduction in long US dollar positioning seen since late 2015. The data captures positioning in the greenback against the euro, yen, UK pound, Swiss franc, and the Australian, Canadian and New Zealand dollars.


According to Khoon Goh, senior FX strategist at ANZ, the selling was fairly broad based, with the most aggressive move coming against the Japanese yen.

Net long positioning in the yen rose by $1.5 billion to $5.2 billion, the highest level seen since December 2011.

There were also solid buying in all other currencies apart from the Australian dollar which saw net long positioning fall by 1,200 contracts to $2.6 billion, snapping a 10-week long buying streak in the process.

The table below, supplied by ANZ, reveals the weekly change in positioning for the week by individual currency, along with overall positioning at present.


Despite the reduction in net long positioning by leveraged investors, the US dollar index rose 0.49% last week, suggesting other investors were buying even as traders were selling.

From the beginning of December last year, the US dollar index has fallen by close to 6%.