IMM specs yen shorts, sterling longs at records-CFTC
Friday, January 26, 2007 3:36:57 PM (GMT-06:00)
Provided by: Reuters News
By Kevin Plumberg
NEW YORK, Jan 26 (Reuters) - Speculators amassed the largest position against the yen ever and built up record bets on sterling in the latest week as hunger for yield continued to be the driving force in the foreign exchange market, data showed on Friday.
The report covering the week to Tuesday showed investors extended their net short yen position to 164,860 contracts from 138,146 contracts in the prior week, the Commodity Futures Trading Commission data said.
The value of the position grew more than $2 billion to $16.9 billion in the latest week.
"This certainly points to the continuing popularity of the yen carry trade," said David Powell, currency analyst with IDEAglobal in New York. In the carry trade, investors borrow in low-yielding currencies in order to buy higher-yielding ones and profit from the spread.
The yen has been a clear sell for many investors because the Bank of Japan has rock-bottom interest rates, at 0.25 percent. One of the most popular carry currencies has been sterling because it has a relatively high interest rate among the most liquid currencies.
On Tuesday, sterling traded at a 14-year high against the yen, at 241.49 yen <GBPJPY=R>.
The CFTC data showed speculative investors increased their net long sterling position to a record 94,728 contracts, up from the previous week's 84,318 contracts.
Finding the most profitable carry trades has been the overriding trend so far this year, continuing from 2006, when the search for yield also was the theme of asset markets.
"As 2007 got underway all the market commentary would suggest volatility would remain low, liquidity high and therefore the carry trade would continue," said Powell.
International Money Market speculators raised their net long dollar position to $1.13 billion, from $1.04 billion the previous week, according to Reuters calculations.
Net U.S. dollar positions are measured against the euro, yen, sterling, Swiss franc and Canadian and Australian dollars.
Being "short" a currency is effectively a bet that it will weaken, while being "long" is a bet it will strengthen.
Extreme net short or long positions in a currency often suggest a reversal in price action is imminent because dealers might be uneasy about keeping such a large position open.
IMM data reflect non-commercial or speculative accounts. The non-commercial positioning is of particular interest as it provides a proxy for broader speculative activity.
JAPANESE YEN (Contracts of 12,500,000 yen)
1/23/07 week 1/16/07 week
Long 52,200 56,031
Short 217,060 194,177
Net -164,860 -138,146
EURO (Contracts of 125,000 euros)
1/23/07 week 1/16/07 week
Long 77,516 67,482
Short 16,506 13,940
Net 61,010 53,542
POUND STERLING (Contracts of 62,000 pounds sterling)
1/23/07 week 1/16/07 week
Long 109,941 96,664
Short 15,213 12,346
Net 94,728 84,318
SWISS FRANC (Contracts of 125,000 Swiss francs)
1/23/07 week 1/16/07 week
Long 5,290 6,476
Short 49,371 48,724
Net -44,081 -42,248
CANADIAN DOLLAR (Contracts of 100,000 Canadian dollars)
1/23/07 week 1/16/07 week
Long 22,471 22,030
Short 100,328 100,997
Net -77,857 -78,967
AUSTRALIAN DOLLAR (Contracts of 100,000 Aussie dollars)
1/23/07 week 1/16/07 week
Long 86,840 73,505
Short 9,592 6,749
Net 77,248 66,756
MEXICAN PESO (Contracts of 500,000 pesos)
1/23/07 week 1/16/07 week
Long 45,335 49,620
Short 27,230 23,120
Net 18,105 26,500
NEW ZEALAND DOLLAR (Contracts of 100,000 New Zealand dollars)
1/23/07 week 1/16/07 week
Long 11,450 14,032
Short 1,255 631
Net 10,195 13,401
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