Speculative investors reduce EUR shorts, turn long CHF

The latest IMM data cover the week from 5 to 12 January.

Positive dollar momentum has faded going into the new year - following a strong rebound in December - and the dollar index has edged gradually lower. This has coincided with a reduction in long dollar positions and non-commercial investors have once again turned net short the dollar - but aggregate shorts remain far from the highs seen last autumn.

The main driver of the turnaround in dollar positioning has been a reduction of EUR shorts, falling from 23 percent of open interest to 11 percent.

The biggest shift in positioning, however, can be seen for the Swiss franc. In only one week, non-commercial investors have gone from being net short the franc to being significantly long - total net CHF longs rising above 40 percent of open interest. This may explain some of the downwards pressure on EUR/CHF, but also suggests that any potential intervention from the SNB could prove very effective - i.e. upside risk to EUR/CHF and USD/CHF from a position squeeze has risen significantly.

Net short Sterling positions have been maintained at somewhat crowded levels. However, as Sterling has seen a decent appreciation since the IMM data was collected on 12 January, the report is likely to overestimate total net shorts.

The commodity currencies NZD, AUD and CAD remain at risk from a position squeeze, as suggested by their significant net long positions.

Danske Bank
http://www.danskebank.com/danskeresearch

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