CFTC funds raise short Brazil real position to six-week high

International speculators increased their bearish bets on the Brazilian real to a six-week high last week before the central bank intervened in the market to lift the currency from its record low against the dollar, US futures markets data show.

Commodity Futures Trading Commission data late on Friday showed that funds and speculators on US futures markets added to their net short real position for the fourth week in a row, the longest run in four months of adding to their bets that the currency will depreciate.

Funds' net short position as of Feb. 11 grew to 32,205 contracts from 30,336 contracts the week before, CFTC data showed. But those figures were for the week to Tuesday last week, before the central bank's intervention on Thursday and Friday in the currency swaps market.

That action helped the real post its first weekly gain against the dollar in seven, dragging the greenback below 4.30 reais from a record high above 4.38 reais.

Currency strategists say the central bank's action should give the real some respite, with the potential to flush out some of those short real/long dollar positions.

Analysts at Citi say their flows data show speculative accounts had been buying dollars "relatively aggressively" since early January and that the four-week week moving flow is now "quite extreme."

As a result, they expect the real to trade more positively in the coming weeks, while strategists at Deutsche Bank also expect "some retracement on valuation and positioning" even though they see longer-term risks for the real.