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Investors Add Dollar Longs Ahead Of The Fiscal Cliff‏

ByDanske Markets
Published 11/20/2012, 04:25 AM
Updated 05/14/2017, 06:45 AM

US fiscal cliff perceived as dollar-positive tail-risk.

EUR shorts are being built again.

AUD and NZD are bought, not sold.

The latest IMM data cover the week from 6 to 13 November.

US fiscal cliff perceived as dollar-positive tail-risk. Notwithstanding the fact that the fiscal cliff could cause a US recession, it is triggering dollar buying. Investors have been unwinding short dollar positions since early October and net positioning is now neutral. There is thus room for further re-positioning, which implies more nearterm potential for the dollar if fiscal cliff concerns intensify.

EUR shorts are being built again. Dollar re-positioning is not least visible against the euro, which has come under renewed pressure. By early last week, when the IMM data were collected, investors had been adding USD 2.5bn to net short euro positions. Net euro positioning is thus back at late August levels. Should positioning become more stretched in this direction, it could be one of the signals suggesting that market concerns about the fiscal cliff have become excessive.

AUD and NZD are bought, not sold. The cyclical commodity currencies have often been mentioned as the most obvious hedges on the FX market against the US fiscal cliff. The idea being that these currencies should sell off in the risk-off environment triggered by the fiscal cliff and the direction in these currencies is more certain than for the other major currencies. The latest IMM data show, however, that investors have been adding marginally to net longs in AUD and NZD rather than scaling back on these.

To Read the Entire Report Please Click on the pdf File Below.

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