COT: A surprise dollar short emerges after week of deleveraging
Head of Commodity Strategy
Summary: The result of aggressive position reductions, both long and short, yielded a very surprise outcome during the week to March 17. Despite seeing the dollar surge against most of its peers speculators still ended up holding a net short dollar position for the first time since 2018.
Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
The below summary highlights futures positions and changes made by hedge funds across forex, bonds and stocks up until last Tuesday, March 17. During this period deleveraging and the dash-for-cash hit a fresh peak. The dramatic reduction in exposure, both long and short, was seen across all asset classes
In forex, speculators cut both long and short positions across the board. Despite seeing the dollar rally strongly against all ten IMM currency futures, it still ended up with a net short position for the first time since June 2018.
The biggest change was seen in EUR where a big reduction in the gross short position helped swing the net back to a long of 32k lots, the first in 18 months. Despite taking a 7.6% hit the Aussie dollar was net bought, again due to aggressive reductions of short positions.
The rout across EM currencies helped drive the biggest percentage drop in bullish bets since 2018 on both the Mexican Peso and Russian Ruble.
The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.
In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.
In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.
Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.
They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.
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