Speculators in International Monetary Market currency futures on the Chicago futures exchanges increased their net short Swiss franc position to the largest in over six years in the week ending June 7, data released on Friday showed. They also kept their net short euro position near a five-year high, according to the data. Speculators increased the net short Swiss franc position to 45,312, the largest since May 1999, from 39,399 contracts the previous week.
Net short positioning in the euro was 17,771 contracts in the latest week, a touch down from the prior week's 18,310 contracts, which was the largest net short position since February 2000.
"As this euro down-move has continued, people still have not had an opportunity to get on board the long dollar as much as they would have hoped," said Todd Elmer, currency strategist with Barclays Capital.
Being "short" a currency is effectively a bet that it will weaken, while being "long" a currency is effectively a bet that it will strengthen.
Though the euro consolidated some of its losses against the dollar in the week reflected by the data, it has continued to fall since then, weighed down weak growth prospects in Europe.
The euro on Friday dropped to a 9-month low of $1.2108, and the dollar rose to a fresh 8-month high of 1.2701 Swiss francs, suggesting that net short positions in the euro and Swiss franc likely were extended further since last on Tuesday.
"Price action is very clear in suggesting that markets are viewing euro rallies as opportunities to trim longs and it is not loaded up on dollars just yet," Elmer added.
The data from the Commodity Futures Trading Commission's Commitments of Traders report on speculative positioning are sometimes used by analysts as an indicator of future market direction.
For example, extreme net short speculative positions often signal an imminent rebound in the currency, while extreme net long positions can suggest a currency has already appreciated a great deal and is poised for a correction lower.
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