- ECB meeting did not change sentiment
- JPY shorts remain stretched
- Carry is back in favor
- ECB meeting did not change sentiment: The potential discussion of a negative deposit rate in Europe did not trigger new shorts in the euro. Rather, net short euro positions fell further to 13% of open interest. This is the lowest level since September 2011 and implies that net positions are back below one standard deviation from the historical average.
- JPY shorts remain stretched: Investors scaled back short yen positions slightly to 35% of open interest ahead of the elections, but short yen nonetheless remains a consensus trade. Net short positions are close to the highest levels seen since the financial crisis and considering the yen sell-off following the election result it is likely that short positions have become even more stretched.
- Carry is back in favor: Long AUD, NZD versus short USD, JPY, CHF is back at pre-crisis levels, indicating that investors are increasingly positioning for 2013 to be a strong carry year. We agree and expect stable macro economic data, the very low FX market volatility and continued aggressive monetary easing to support carry strategies over the coming quarters.
The latest IMM data covers the week from 4 December to 11 December.