Asset managers are betting big on further weakness in the US dollar.
According ANZ Bank, citing the latest Commitment of Traders report from the US Commodity Futures Trading Commission (CFTC), real money managers increased their short US dollar positions in futures and options to a new record high in the week ending Tuesday, January 9.
The chart below from ANZ shows net US dollar positioning against major currencies such as the euro, Japanese yen, British pound, Swiss franc and the Australian, Canadian and New Zealand dollars.
After establishing a short US dollar position midway through last year, selling from asset managers clearly intensified in the early parts of 2018.
The CFTC defines asset managers as “institutional investors, including pension funds, endowments, insurance companies, mutual funds and those portfolio/investment managers whose clients are predominantly institutional”.
A short position from this cohort indicates that, as whole, they are looking for the US dollar to weaken in the period ahead.
Helping to explain the sharp and sudden selloff in the USD, ANZ said net long positioning in the euro, in comparison, jumped to the highest level on record last week.
Given the price action in both the dollar and euro since the cutoff date for the CFTC report last Tuesday, ANZ says the trends established in the first week of 2018 likely continued late last week.
“The strong rally in EUR past the 1.22 level post the CFTC cut-off date suggests further buying by funds,” says Khoon Goh and Rini Sen, FX strategists at ANZ.
On Friday, largely reflecting strength in both the euro and British pound, the US dollar index, or DXY, fell to the lowest level since January 2015, extending its losses from early 2017 to over 12%.