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How Hedge Funds Are Now Positioning Currencies

Published 11/19/2013, 04:50 AM
Updated 07/09/2023, 06:31 AM
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Chart 1: Hedge funds have turned net long US Dollar once again
US Dollar Index vs. COT USD Positioning
The US dollar has performed quite well over the last two or more years, but in recent times has tracked more sideways then anything else. Hedge funds and other speculators have started adding to their US dollar bets yet again, after a slight period of holding overall cumulative net short positions.

Chart 2: With Euro at resistance, speculators are being shaken out
Euro/USD vs. COT Euro Positioning
One of the main reasons hedge funds shorted the dollar in recent weeks was the large build up in euro positions. However, as the euro hit resistance, as shown in the chart above, the price pulled back and the positioning has been cut dramatically.

Chart 3: Fund managers continue to hold heavy short bets on the Yen
Yen/Dollar vs. COT Yen Positioning
The final currency in the G3 complex is the Japanese yen, which has collapsed in 2013. The large short positions held by hedge funds and other speculators have not yet been squeezed in any shape or form, even temporarily. This is quite rare, so caution is advised, but regardless of the situation... central banks like the BoJ continue to print money and for the time being are pushing currencies in directions they want.

Chart 4: The alternative currency continues to under perform
COMEX Gold vs. COT Gold Positioning
The alternative to the garbage of devalued currencies discussed above (dollar, euro and yen) is Gold, an alternative investment currency (if one can call it that) which cannot be printed or devalued. After a stellar performance for the last 12 years, Gold is now having the worst 12 months of drawdowns since 1985. Hedge funds and other speculators have cut positioning dramatically since 2011, but there might be more to come.

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