AUD longs gained for the third week in a row, rising to 47,569 from 43,574. They now exceed JPY longs, which fell to 41,185 from 47,139. While representing the largest long positions of the IMM currencies, they pale in comparison to positions held last year, suggesting investors have been reluctant to rebuild exposures against a backdrop of heightened risk in Europe and the US.
According to Citigroup’s economic surprise index, which tracks whether actual economic data releases are above or below market expectations, has indicated a skew towards positive surprises in recent Australian data releases, which is not the case for the G10 as a whole. Citi suggests that regional developments may be more significant for Australia than events taking place in Europe or the US. Notwithstanding a sharp slowdown in Asia, investors could risk being too pessimistic on the Australian economy, Citi analysts say.
“Downbeat risk appetite may remain a limiting factor for AUD for the time being, but on any improvement, we suspect stronger data flow should leave AUD among the best positioned. Given the deterioration in data flow in Europe, we continue to believe that short EURAUD positions are attractive” say Citi’s analysts.
The latest IMM data also shows a reversal in last week’s rebound in GBP longs, dipping back to a neutral stance, from a net long of 10,961, which was a 10-week high.