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The Currency Futures Report

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Have Commodity Exports, Will Recover

Mon, Oct 12 2009, 08:34 GMT
by Bob Kozak

Alaron

Commitment of traders data released Friday October 9th showed an increase in positions betting against the US Dollar last week. Significant changes include an increase in short positions betting on the Sterling to decrease in value, and an increase in long positions in the Euro and Canadian Dollar.

JAPANESE YEN (Contracts of 12,500,000 yen)

10/06/09 week 9/29/09 week

Long 62,127 63,449

Short 17,484 18,593

Net 44,643 44,856

EURO (Contracts of 125,000 euros)

10/06/09 week 9/29/09 week

Long 86,229 77,852

Short 35,184 38,086

Net 51,045 39,766

POUND STERLING (Contracts of 62,500 pounds sterling)

10/06/09 week 9/29/09 week

Long 12,636 16,129

Short 74,742 63,955

Net -62,106 -47,826

SWISS FRANC (Contracts of 125,000 Swiss francs)

10/06/09 week 9/29/09 week

Long 28,261 22,857

Short 4,791 5,264

Net 23,470 17,593

CANADIAN DOLLAR (Contracts of 100,000 Canadian dollars)

10/06/09 week 9/29/09 week

Long 41,391 23,843

Short 5,616 5,634

Net 35,775 18,209

AUSTRALIAN DOLLAR (Contracts of 100,000 Aussie dollars)

10/06/09 week 9/29/09 week

Long 58,029 55,700

Short 7,864 8,002

Net 50,165 47,698

Highlights

Australia surprised currency speculators this past week with a 1/4 point increase in their interest rate suggesting that the global economy may actually be recovering from the recent economic crisis.
Conditions are still weak in the US, Europe and Japan however, a condition that is likely to become more clear over the coming week.

Commodity exporting economies such as Australia (Gold) and Canada(Oil)have fared far better than the US and Europe in 2009. With this move, Australia became the first of the G-20 nations to raise interest rates since the start of the financial crisis. The shift in monetary policy toward tightening is aimed at heading off inflation as their economy improves. Australian Reserve Bank Governor Glenn Stevens indicated in a statement that "this may be the first in a series of interest rate increases", according to the Wall Street Journal. Both the Australian and the Canadian Dollar finished the week at record highs for 2009, and appear poised to move significantly higher. We could see a test of parity with the Canadian and US Dollar over the near term.

In contrast, the US, Europe and the UK are going to need to keep their interest rates low to stimulate economic activity in order for their economies to recover. This past week, several countries intervened to keep their currencies from rising too much against the US Dollar. Higher currency prices have the effect of making that nations exports less attractive (More expensive) to their trading partners abroad, slowing prospects for economic recovery.

The US Dollar index hit 14 month lows last week, recovering some ground late in the week on statements from ECB President Jean Claude Trichet favoring a strong US Dollar policy and from Fed Chairman Ben Bernanke on the importance of a strong US Dollar, but it is unlikely any actions will be taken to support the dollar as it is beneficial to US exports which are vital to economic recovery. Look for continued weakness in the US Dollar and especially the British Pound over the near term.

Published on  Mon, Oct 12 2009, 10:43 GMT