COT: Greenback remains exposed to long liquidation
Head of Commodity Strategy
Summary: A reduction in bullish dollar bets was seen in the week to November 13 with USD remaining exposed to long liquidation.
Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
To download your copy of the Commitment of Traders: Forex report for the week ending November 13, click here.
To download your copy of the Commitment of Traders: Financials report for the week ending November 13, click here.
IMM currency futures
Speculators reduced bullish dollar bets against nine IMM currency futures by $1.9 billion to $28bn. This despite seeing the dollar index reach a 17-month high as the euro temporarily dropped below €1.13 and Brexit jitters once again hit sterling. Dollar long positions were pared against most with the exception being the 15% increase in the yen net-short.
The greenback remains exposed to long-liquidation with speculative traders holding short positions in seven IMM currencies with the exception being small longs in the Mexican peso and the Russian ruble.
In fixed income, leveraged funds were sellers and asset managers buyers across the whole yield curve. This was particularly the case in Ultra T-Bonds where leveraged funds increased the net-short by 9% to a fresh record of 481,000 lots. The DV01, which measures the dollar value of a one basis point move in yield, jumped by $14 million to $271.5m, a new record.
Expanding the focus from leverage traders, we can see how the total futures open interest across the US yield curve is broken down into the different categories defined by the CFTC.
This shows how for months now, continued selling by leveraged traders or speculators (as they are often referred to) has been absorbed by asset managers or real money investors. They can not both be right, and given their often short- versus long-term, focus the risk seems skewed to the upside – i.e. towards lower yields.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.