New Billions Flow into Safety of Dollar

05/30/2012 6:00 am EST

Focus: CURRENCIES

New COT data shows large speculators poured nearly $7 billion more into US dollar long positions, writes the staff at CountingPips.com, also describing new trends impacting the euro, pound, yen, and more.

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures speculators raised their overall US dollar long positions last week for the third consecutive week as risk aversion dominated the markets.

Non-commercial futures traders, including hedge funds and large speculators, increased their total US dollar long positions to $35.14 billion on May 22, up from a total long position of $28.52 billion on May 15, according to the CFTC COT data and calculations by Reuters, which calculates the dollar positions against the euro, British pound, Japanese yen, Australian dollar, Canadian dollar, and the Swiss franc.

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The COT report is published every Friday by the CFTC and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity.

See related: Trading Forex Using the COT Report

Each currency contract is a quote for that currency directly against the US dollar, whereas a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar. The graphs overlay the forex spot closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.

Euro (EUR)

Currency speculator sentiment plummeted for the euro currency again last week as euro net short positions, or bets against the currency, increased to 195,361 contracts on May 22, up from 173,869 net short contracts on May 15. Euro short positions have surged to the highest level on record for a second straight week and surpassed the May 15 level when short contracts totaled 173,869.

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NEXT: British Pound, Japanese Yen, and More

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British Pound (GBP)

British pound sterling positions decreased last week for a second consecutive week after rising for four straight weeks and reaching the highest level in over a year on May 8. British pound positions saw a total of 11,340 net long contracts on May 22 following a total of 25,021 net long contracts registered on May 15.

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Japanese Yen (JPY)

Japanese yen speculative contracts improved last week for a sixth consecutive week. Yen positions totaled 18,015 net short contracts reported on May 22 following a total of 34,315 net short contracts on May 15.

The improvement in the Japanese positions has coincided with heavy risk aversion in the markets and the US dollar falling against the yen in the spot price forex market. The USD/JPY pair currently trades under the 79.50 level.

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Swiss Franc (CHF)

Swiss franc speculator positions decreased sharply for a second consecutive week last week. Speculator positions for the Swiss currency futures registered a total of 34,851 net short contracts on May 22 following a total of 26,694 net short contracts as of May 15.

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NEXT: Commodity Currencies in Focus

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Canadian Dollar (CAD)

Canadian dollar positions declined last week for a third straight week after reaching the highest level of the year on May 1. Canadian dollar positions declined to a total of 38,555 net long contracts as of May 22 following a total of 51,005 long contracts reported for May 15.

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Australian Dollar (AUD)

Australian dollar long positions dropped sharply for a third consecutive week and brought aussie positions to a negative number for the first time in years. Aussie positions declined to a total net amount of 16,898 short contracts on May 22 after falling to 4,734 net long contracts as of May 15.

AUD speculative positions are now at the lowest level since at least 2009, and two weeks ago, positions surpassed the previous low level of the last 12 months, which was a total of 5,167 contracts on September 26, 2011.

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By the Staff at CountingPips.com

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