These charts show traders continue to believe in the Donald Trump 'reflation trade'

While it’s slipped in recent weeks, it’s clear currency traders, collectively, think the US dollar will continue to climb in the period ahead.

This chart from ANZ underlines the point.

It shows net speculative positioning for a variety of major currencies from data released by the US Commodity Futures Trading Commission (CFTC) in its weekly Commitment of Traders report.

Net positioning in futures and options is simply the sum of long positions. minus the sum of short positions held by speculators, with net short positioning suggesting that traders, collectively, are expecting a currency to weaken.

From the euro to the Japanese yen, Swiss franc to the Canadian and Australian dollars, speculators remain short against the US dollar, even if positioning was reduced fractionally last week.

Of all the above mentioned currencies, the only net long position reported among speculators was in the New Zealand dollar with longs standing at $US900 million, the smallest total seen since May last year.

Fitting with the view expressed by currency speculators, net short positioning in US 10-year bonds also increased, rising to yet another record high last week.

Khoon Goh and Rini Sen, strategists at ANZ, said that additional short positions in US treasuries futures and options suggests speculators are positioning for higher US interest rates.

That also helps to explain why net US dollar long positioning remains elevated as traders speculate that increased fiscal stimulus from Donald Trump will result in faster US economic growth, higher inflation and an increase in US interest rates.

After the release of the latest US CFTC COT report — capturing investor positioning as at the close of business last Tuesday — Goh and Sini believe that long US dollar remains elevated and “susceptible to further near-term reductions”.

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