Dollar longs added, Yen longs pared ahead of FOMC and BoJ – Deutsche Bank

Research Team at Deutsche Bank, notes that investors further added to their long dollar exposure in the past week ahead of the FOMC meeting and amid improving global risk sentiment.

Key Quotes

“Implied USD longs as a fraction of open interest rose to 12.2% from 10.7% previously. At the same time long positioning in JPY was pared meaningfully given expectations of fresh BoJ easing this week. Meanwhile, speculators have continued to extend their net shorts in both EUR and GBP. Notably, GBP net shorts are the highest since June-2013. Investors were more bullish on the commodities currencies. Large amount of longs were added in AUD, and CAD and NZD also saw a modest extension in their net long position. Sentiment in MXN deteriorated further as net shorts were added.

Traders in Financial Futures data show that leveraged funds have added substantial amount of longs to their implied dollar longs, whereas asset managers have reduced theirs significantly. Leveraged funds extended their bearish positioning in GBP and EUR considerably. Interestingly, asset managers improved their sentiment in both the pairs by adding net longs in EUR and reducing net shorts in GBP. The yen witnessed some divergent behavior ahead of the BoJ meeting, with leveraged funds paring net longs and asset managers reducing their net shorts. In CHF, both communities extended their bearish positioning causing asset managers to flip to net short from net long.

In the dollar bloc, leveraged funds extended their net longs significantly in AUD, modestly in CAD; while reducing their bullish exposure in NZD. Meanwhile, asset managers improved their bullish positioning in CAD, reduced their bullish positioning in AUD and bearish positioning in NZD. Investor activity in MXN remained marginal in the week.”