Euro debt concerns cause further rise in EUR shorts

The latest IMM data covers the week from 27 December to 3 January.

Net EUR short contracts set new record: Non-commercial investors added further to EUR shorts in the week ending 3 January, which also saw EUR/USD dip below 1.30 for the first time since January last year. While the beginning of 2011 was also dominated by European bond market stress and US economic outperformance, short EUR positioning was nowhere near the current extreme levels. However, with plenty of event risks ahead (see Research: Euro area – “what to watch” in the coming months, 5 January) and a broad trend for a weaker EUR still in place, a further increase in EUR shorts cannot be ruled out.

Aggregate USD longs scaled back: Despite the significant build-up in EUR shorts, aggregate USD longs were reduced as non-commercial investors added to longs in JPY, AUD and NZD. Thus, overall USD positions have corrected lower by USD4.7bn, after reaching the highest levels since double-dip recession fears dominated financial markets last summer.

Investors add to longs in AUD, NZD and JPY: Interestingly, non-commercial investors added to long positions in pro-cyclical currencies such as AUD and NZD. This may reflect that the sharp build-up in EUR shorts relates primarily to eurozone debt concerns, rather than general fears over downside risks to global demand. Long positions in JPY also increased, however

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