Net Shorts In EUR Soared To Record High

USD positions stayed in the positive territory for the second consecutive week, adding $3.55B to $3.81B in the week ended February 2. During the week, the largest changes came from declines in net longs in AUD and CAD, both being commodity currencies. Net shorts in EUR surged to a new record.

In late January, the US President Barack Obama proposed limits on risk-taking at banks. This greatly increased risk aversion in the market and investors started turning away from high-yield investors and favored 'safe assets' such as USD and JPY. This, together with escalated budget deficit problem in the Eurozone, pushed USD positions significantly higher.

After entering the negative territory on December 8, EUR's net speculative short positions have been increasing. The pace has accelerated over the past 2 weeks and deepened to a record of -43741 in the week ended February 2. Traders dumped their position in the euro as Greece's budget deficit problem turned out to be more serious than previously anticipated. Sovereign crisis has recently shown signs of spreading to nearby countries.

Also note the JPY shifted from net shorts to net longs last week as investors favored the currency amid risk aversion. JPY positions moved from positive to negative territory in mid-December and stayed there for a month before exiting there last week.