There were five significant position adjustments by speculators in the currency futures market in the last full reporting period of the year, ending on December 27. That many participants cut positions is not really surprising.  It is where speculators added to exposure that may be more intriguing.
Of the five significant speculative adjustments, by which we mean a gross position adjustment of 10k of more contracts, the Japanese yen accounts for two. Speculators slashed gross long positions by a third (23.6k contracts) to 40.6k. They also covered 10% of their gross short position (12.1k contracts) leaving 127.6k contracts.
Speculators more than halved their gross long Swiss franc position. The 19.2k contract liquidation brings the gross long position to 14.3k contracts. It follows a 27.8k contract jump the prior reporting period, which we had suspected was linked to the contract expiry. The immediate unwind of its lends more credence to our suspicion. Last week’s jump in gross longs swung the net position in favor of the bulls, but not with the unwind, the net speculative position is short again.
That leaves the two currencies in which speculators took on substantial more risk in thin markets ahead of the end of the year. The bulls scooped up 14.4k Canadian dollar futures contracts to nearly double the gross long position to 36.6k. The bears saw an opportunity too and added 4.2k contracts to its gross short position which now stands at 38.2k contracts. The net position was reduced to 1.6k contracts from 11.8k net short.
Of note the net speculative position in the Australian dollar is short 1.6k contracts. While the net short position in the Canadian dollar was being reduced, the net Australian dollar position is falling ad shifted to favor the shorts for the first time in six months. This swing in the net position was a function of the 11.2k-contract increase in the gross short positions to 45.6k contracts. To illustrate the bearish development not the gross short position began the month near 27.4k contracts. The bulls also saw an opportunity and added 5.8k contracts to the gross long position, which now stands at 44.1k contracts.
