JPY: Carry trade taking a breather? - Rabobank

Jane Foley, Senior FX Strategist at Rabobank, lists down the IMM net speculators’ positioning as at 03 January, 2017.

Key Quotes

“Having been increasingly bearish on the yen for nine consecutive weeks, speculators have taken a breather. The levels of yen shorts has dropped back modestly signalling that the momentum behind the carry trade may have started to stall.”

“Although net USD longs edged higher from last week’s levels, they remain below the levels of the middle of December. Given that there is a lot of good news already priced-in to the USD, last week’s data releases did not provide too much by way of strong direction.”

“Having declined since the start of December, bearish bets against the pound again pushed higher last week. Even though recent UK data releases have been constructive, focus remains drawn to Brexit related political news.”

“EUR shorts dropped sharply following the December ECB policy meeting and continued to move lower into the end of the month. Last week stronger German and EZ inflation data re-opened the debate about the extent of ECB policy easing as speculators consolidated their EUR shorts.”

“Having briefly jumped into positive territory in late December, CHF positions fell back into negative ground before the end of the year. Shorts continued to rise last week. Positions remain influenced by expectations regarding the outlook for the USD and safe haven demand.”

“Following the sharp fall in CAD net shorts at the end of December, speculators increased them again last week. Oil prices are in focus, though the better than expected December labour market report should draw attention back to the economy. AUD speculators’ positions dropped into negative territory at the end of last year for the first time since June 2016. Shorts continued to grow last week.”