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Weekly Speculative Positions: After Fed Rate Hike, Speculators Close their Short CHF and Open Long CHF


Swiss Franc

Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.

The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The carry trade against CHF collapsed.

The reverse carry trade in form of the Long CHF started and lasted - without some interruptions - until the peg introduction in September 2011.

In mid 2011, the long CHF trade became a proper carry trade - and not a reverse carry trade anymore - because investors thought that the SNB would hike rates earlier than the Fed.

Last Week’s data:

There was a sudden adjustment of CHF speculative position. Two reasons for us

  1. The expiry of December contract was not rolled over given that speculators do not like sudden surprise like in January 15, 2015.
  2. The Fed has hiked rates and with this fait accomplis speculators sell the news. They closed their short CHF and opened new CHF longs. And as opposed to Japanese pension funds, the Swiss have less possibility to invest abroad and seek higher returns.

Chandler sees the net long CHF quickly unwound.

The expiry of the December currency futures may spurred more than normal speculative position adjusting.  The out-sized 27.9k contract jump in the speculative gross long Swiss franc futures position is a prime example.  It was more than enough to swing the net speculative position back to long (7.1k contracts).  If our understanding it correct, it should quickly be unwound.

Given that there was a rise in Gross Long CHF by 27.9K contracts, this explanation might not perfectly fit.

Speculative Positions

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source: Oanda

Of the 16 gross currency positions we track, five were in excess of 10k contracts.  This is unusually large.  However, two of them were a continuation of a recent pattern.  Speculators have been covering gross short euro positions, even as the euro has fallen to new multiyear lows. Specifically, speculators covered 15.6k contracts to bring the gross short position to 195.5k contracts.  It is the third consecutive week of short covering, during which time it has covered 60k previously sold contracts.

The other trending positioning for speculators has been the piling into short yen positions.  Speculators added 13.8k contracts, lifting the gross short yen position to 139.6k contracts.  This is a cumulative rise of 67k contracts over the past three weekly reporting periods. There has been a dramatic change in the net speculative position.  It was long almost 69k contracts in late October.  It is now net short 75.4k contracts.

However, like the Swiss franc, we suspect that the 11.9k contract reduction of the gross short Canadian dollar position may have also been elevated by the expiry of the December future contracts. The gross short position stands at 34.6k contracts.  The net short position was nearly halved to 11.8k contracts.

The 10.2k contract increase in the speculative gross short peso may have been a continuation of the bearishness toward the peso.  The gross short position has been trending higher since bottoming in late October near 54k contracts.  It now stands at 87.5k contracts.

Elsewhere, the net long Australian dollar position continues to be trimmed.  It fell nearly 10k contracts in the latest reporting period to stand at 3.9k contracts.  In late November is was more than ten-fold larger.  Lastly,  we note that despite sterling’s heavy tone in the spot market, speculators looked to take some profits and pick a bottom.  They covered 9.4k gross short contracts (leaving 103.5k) and added 3.6k contracts to the gross longs position (lifting it to 44.2k contracts).  The net position (-59.4k contracts) has been reduced for three consecutive reporting periods.

Bottom picking was evident in the US 10-year note futures.  Speculators added 57.5k contracts to the gross long position.  It stands at 509.5k contracts.  The bears were undeterred and added 10.2k contracts to the gross short position, raising it to 730.6k contracts.  As a result the net short position was slimmed to 221.1k contracts from 268.4k.

Both bulls and bears moved to the sideline in the oil futures.  The bulls lightened up by 11.1k contracts, bringing the gross long position to 603.7k contracts.  The bears covered 25k contracts, leaving them gross short 167.6k.  The results was a 13.9k increase in the net long position to 436.7k contracts.


20-Dec Commitment of Traders
Net Prior Gross Long Change Gross Short Change
Euro -78.0 -87.5 117.5 -6.1 195.5 -15.6
Yen -75.4 -63.4 64.2 1.8 139.6 13.8
Sterling -59.4 -72.3 44.2 3.6 103.5 -9.4
Swiss Franc 7.1 -25.3 33.5 27.9 26.4 -4.5
C$ -11.8 -21.9 22.2 -1.8 35.0 -11.9
A$ 3.9 13.5 38.3 -2.0 34.4 7.6
NZ$ -7.0 -3.7 28.3 -1.1 35.3 2.2
Mexican Peso -66.7 -57.7 20.8 1.8 87.5 10.8
US Treasuries -221.1 268.4 509.5 +57.5 730.6 +10.2
Crude Oil 13.9 436.7 603.7 -11.1 176.6 -25.0
(CFTC, Bloomberg) Speculative positions in 000’s of contracts


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George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.
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