Currency speculators reduced their net short positions against the British pound in the latest week, ahead of a crucial vote about Britain's future in the European Union, according to data from the Commodity Futures Trading Commission released on Friday. The net short positions held by speculators against sterling had risen to a three-year high in the previous week. The positions were tracked through Tuesday, nine days before the June 23 referendum on Britain's membership in the EU, commonly referred to as the "Brexit" vote.
Speculators' reduction of net short positions came in the face of an ongoing decline in the pound due to investor jitters as some polls showed growing support for the "Leave" camp. The pound declined by around 3 percent against the dollar during the June 7-14 timeframe.
Even though speculators reduced the number of bearish bets against sterling, longer-term investors and those looking to hedge other bets reduced exposure to sterling at the same time, driving down its price against the dollar. To be short a currency is to bet it will decline in value, while being long is a view its value will rise. Sterling on Friday rose over 1 percent and hit a one-week high against the dollar in the wake of the shooting death of British Member of Parliament Jo Cox, an advocate for the "Remain" movement to stay in the EU.
Analysts said Cox's death increased the likelihood Britain would stay in the EU or that leaders would postpone the referendum. Meanwhile, speculators favored the US dollar for a fourth straight week, but reduced their net long positions by more than $8 billion, CFTC data showed. The value of the dollar's net long position fell to $2.72 billion in the week ended June 14 from $11.3 billion the previous week. The Reuters calculation for the aggregate US dollar position is derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc, Canadian and Australian dollars.