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Head of Fixed Income Strategy
COT: Dollar long cut by most in eight years
Ole Hansen
Head of Commodity Strategy
Summary: Speculators cut bullish dollar bets against ten IMM currency futures by the most in eight years during the week to March 10. Collapsing US interest rates and yields helped drive unwinding of leveraged and carry positions, especially against the euro and Japanese yen.
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.
Speculators cut bullish dollar bets by the most in eight years during the week to March 10. A surge in the probability of another near-term Fed rate cut helped sparked the biggest drop in Libor since 2008. The resulting narrowing of interest rate spreads to other major currencies drove an unwinding of leveraged and carry positions. The JPY meanwhile attracted aggressive short-covering as USDJPY broke below key support. The gross long against ten IMM currency futures and the Dollar Index was cut by 90% to just $1.7 billion, a 21 months low.
The Mexican peso overtook the dollar as the most favored long. This despite falling by 7.4% during a week where many EM currencies saw heavy selling. Commodity dependent currencies remained under pressure, not least the Canadian dollar which turned back to a net short as crude oil got slammed.
The dramatic slump in the dollar long was led by euro and Japanese yen buying. The euro net-short was cut by 85% ($10.5 billion equivalent) to the least since October 2018. The Japanese yen turned net long for the first time since October following $6 billion worth of buying.
Leveraged fund positions in bonds, stocks and VIX
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.
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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