Speculators built up record positions against the yen for a third straight week and also increased their bets against the Swiss franc, data from the Commodity Futures Trading Commission showed on Friday.
Investors extended their net short yen position to 173,005 contracts from 164,860 contracts in the prior week, the Commodity Futures Trading Commission data said. The yen slumped to its lowest level in about four years against the dollar this week, extending losses made after the Bank of Japan left interest rates on hold at 0.25 percent in January.
The yen and Swiss franc have been the favourite funding currencies of speculators, who have been selling them for higher yielding currencies in so called carry trades. International Money Market speculators raised their net long-dollar position to $5.3 billion in the week to Tuesday, from $1.1 billion the previous week, Reuters calculations show. The net dollar position is measured against the euro, yen, sterling, Swiss franc, Australian and New Zealand dollars.
Investors also pared back their bets in favour of the New Zealand and Australian dollars in the last week, and trimmed their sterling long positions from record highs the previous week, the IMM data show.
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.
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