Short dollar positions are being unwound

Danske Research Team from Danske Bank A/S at 12/14/09

 

The latest IMM data cover the week from 1 to 8 December. Stronger-than-expected US employment data on 4 December sent the dollar stronger, as short positions were unwound. Total net short dollar positions were reduced to USD12.3bn from USD22.4bn. Especially long EUR, JPY and CHF positions were scaled back, as dollar shorts were covered. Speculative investors even turned marginally net short EUR against USD for the first time since April after having been quite long for the past six months.
In general, speculative positioning is less extreme than a few months ago, i.e. fewer currencies with very crowded positions. This is not least visible for USD, NZD and EUR, and is likely the result of a general position-closing ahead of year-end. Hence, price movements could become more erratic in the coming weeks.