Speculators haven't been this bullish on commodity currencies in years

Photo by Bradley Kanaris/Getty Images

Traders continued to pile into commodity currencies such as the Canadian, Australian and New Zealand dollars last week, according to latest data released by the US Commodity Futures Trading Commission (CFTC) on Friday.

Net long positioning in all three currencies increased by $US1.3 billion to $US6.7 billion last week, according to ANZ’s currency strategy team, leaving it at the highest level since early 2013.

Net positioning is simply the sum of purchases less sales in a particular currency by traders. A net long position indicates that traders, collectively, are betting on further strength in that particular currency.

“AUD saw the most demand with $US600 million of net buying, followed by CAD at $US500 million and NZD at $US300 million,” said Khoon Goh and Rini Sen, strategists at ANZ.

As a result, commodity currencies have now seen net inflows in each of the past five weeks.

Those inflows can be clearly seen in the chart below from ANZ which shows the relationship between net positioning in commodity currencies versus movements in the CRB commodity price index.

Those inflows were no doubt assisted by waning interest in the US dollar with traders reducing net long positioning in the greenback by a further $US2.2 billion to $US11.4 billion, leaving it at lowest level since October last year.

Goh and Sen say that it remains to be seen whether strong US data and a more upbeat Fed will be enough to see a halt to the dollar selling in the week’s ahead.

The figures used by ANZ come courtesy of the CFTC’s weekly Commitment of Traders report, a snapshot of positioning in futures and options at the close of business each Tuesday.

ANZ uses non-commercial positions reported by the CFTC as they are seen as a proxy for speculative positioning as they seek to profit from movements in the asset price as opposed to hedging business activities.

That means changes in positioning in the CFTC report can be used to extrapolate broader market views on where a particular currency is likely to trade in the future.

On current form, traders, and their money, are saying that commodity currencies are likely to do well in the period ahead.

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