FXstreet.com (Barcelona) - The euro was another underperformer with asset managers, hedge funds and corporates all adding to shorts. This is clearly a risk aversion trade, though whether it is fiscal-cliff related or an adverse reaction to issues with the Greek bailout remains in question. According to Research Analysts Geoffrey Yu and Gareth Berry at UBS. “We would err on the side of the latter given that the USD/JPY continues to find bids, while performance in the EUR/JPY has been a bit more inconsistent (especially within the leveraged community).”

“The EUR's positioning remains the worst within all G10 currencies tracked on a relative basis, though on an absolute basis both 3-month and 12-month structural positioning is less stretched compared to more extreme levels seen over the last 12 months. Low volumes meanwhile continue to be an issue across all currency markets. Only two of the G10 currencies tracked saw volumes surpass 100% of average, while only one out of the 10 EM pairs also managed these levels.” they warn.

“This suggests that heading into year-end, clients remain very reluctant to trade off very binary themes. With expectations that all governments or central banks will choose to 'muddle through', most clients are staying out. For risk currencies, asset managers exited positions in the AUD, NZD and SEK - but overall positioning was largely unchanged.” the analysts posit.