For the first time in nearly two years FX traders, collectively, are short the US dollar.
According to latest figures released by the US Commodity Futures Trading Commission, net short positions in the US dollar totalled $3.6 billion, representing an increase of $4.1 billion in the prior corresponding week.
It was the first time since June 2014 that, collectively, speculative investors were net sellers of US dollars.
According to Khoon Goh, senior FX strategist at ANZ, the reported data was prior to the FOMC and BoJ decisions on Wednesday and Thursday last week, suggesting that “leveraged funds likely added to their short positions”, in his opinion.
Although Goh notes that the selling was across all the major currencies, there was a noticeable increase in net Australian dollar long positioning, rising by $1.2 billion to $4.6 billion, the highest level seen since September 2014.
The reported increase came just a day before the release of Australia’s March quarter CPI report, something that came in well below expectations, placing significant pressure on the Aussie.
For those who recently added to long positions, the sharp decline in the Aussie would have been painful, and to some very costly.
Whether that remains the case will largely be determined by the RBA’s May monetary policy decision due out this afternoon, something that has seen markets and economists split on whether the bank will cut interest rates to a fresh low of 1.75%.
The decision is due out at 2.30pm AEST.
The chart below, supplied by ANZ, reveals current speculative positioning in the US dollar along with other major currencies.
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