Euro speculators brought their net short position to a record high of 71,600 contracts or US$12.1-billion as of Feb. 23, 2010. This is significantly higher than the prior week, according to U.S. Commodity Futures Trading Commission data released on Friday.
The numbers hint that Euro traders are unfazed by the extreme positioning and are willing to move even further short the currency, despite the threat of a looming short covering period, according to Scotia Capital.
Data shows that remaining longs cut their positions and shorts added to theirs, with the ratio of shorts to longs now standing at 3.2 to 1. Meanwhile, the overall net long US dollar position increased to its highest level since 2008.
As for the Canadian dollar, the net long position increased for the second straight week. The currency’s ability to hold strong, despite the Euro’s move to a new record short, demonstrates the willingness to take on risk through long Canadian dollar positions, Scotia noted.
“We continue to have a bullish outlook for CAD, partially due to positive sentiment, and expect it to move sustainably to parity by the end of the second quarter,” the firm’s currency strategists Camilla Sutton and Sacha Tihanyi said in a report.