Traders continue to buy the US dollar, as seen in the chart below.
From ANZ Bank, using data from the US Commodity Futures Trading Commission (CFTC), it shows net US dollar speculative positioning against the euro, yen, UK pound, Swiss Franc and commodity currencies such as the Canadian, Australian and New Zealand dollars since the start of 2014.
Net speculative positioning, defined as non-commercial positions reported by the CFTC, is the sum of long and short options and futures positions in a particular asset, in this case the US dollar.
A net long position indicates that traders, collectively, are looking for strength ahead.
This week, one thing immediately stands out.
After constant selling since the start of the year, seeing net short positioning rise to the highest level since mid-2014, traders are back buying the US dollar, and with a bit of gusto.
According to Irene Cheung, Senior Asia Strategist at ANZ, net speculative long positioning swelled to $US8.4 billion last week, up a hefty $US5 billion from one week earlier, thanks to buying against all major currencies except the euro.
“Leveraged accounts raised their net JPY shorts by $US1.5 billion to $US12.6 billion, the biggest short position since June 2015 and near record levels,” she said.
Traders also ditched commodity currencies, led by selling in the Canadian dollar.
“The bulk was in the CAD, where net longs were pared back by $US900 million to $US2.6 billion,” Cheung says.
“Long AUD positions were also trimmed by $US100 million to $US4.1 billion, the least long since July.
“Meanwhile, leveraged funds added to their net NZD shorts by $US400 million to $US1.1 billion, close to the record overall short position of July 2015.”
Elsewhere speculators also sold $US400 million in both the Swiss franc and UK pound. The euro bucked the dollar dominance elsewhere, recording $US300 million of inflows over the week.
While the US dollar has gone from market dog to market darling over the past couple of months, Cheung says the price action since the CFTC cutoff date last Tuesday suggests some profit-taking in the dollar may now be taking place.
“The USD has since eased amid no material progress in tax reform proposals, suggesting some trimming of long USD positions,” she says.
While the report only captures positioning reported by the CFTC, not the entire market, it can be used to extrapolate broader views held by currency traders.
On that score, they’re continuing to back the buck, at least for the moment.