COT: CHF, JPY and USD bought in response to virus spread

Forex

Ole Hansen

Head of Commodity Strategy

Summary:  Speculators bought dollars for a second week with JPY and CHF also in demand as the death toll from the coronavirus continued to rise and infections accelerated


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.

Hedge funds and other large speculators bought dollars for a second week as the Coronavirus uncertainty helped trigger renewed demand. Against ten IMM currency futures and the Dollar Index the dollar long rose by $2.2 billion to $6 billion, a four-week high. 

The dollar buying was broad based with the exception being a 19% reduction in JPY shorts and a more than doubling of the CHF long to the highest since 2016 

Leveraged fund positions in bonds, stocks and VIX

 

Speculators cut short positions in the Cboe VIX future (Ticker: VX) by 19% to 139k lots. Still an elevated and exposed position  considering the continued rise in volatility since last Tuesday. Adding to this a return to backwardation which has removed the roll-yield short sellers have benefited from in recent months.  


What is the Commitments of Traders report?

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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