USD Limps to Month End, Spec Shorts Grow

USD ended a miserable month as it lagged alongside the euro on Friday. CFTC data showed speculative dollar shorts climbing 14%. The week concluded with a focus on European banking worries and U.S. manufacturing.

The euro underperformed the dollar after a leaked EU report suggested that parts of the continents banking sector continue to require government life support and that large parts of the industry will need to be restructured. A downgrade to Irish growth forecasts also impacted EUR. Low yielders (CHF, JPY) led the market on Friday as carry trades were unwound ahead of the weekend and Japans golden week holidays. Gold soared nearly $30 to a record close of $1563. On the week, the Swiss franc was the top performer with the dollar falling broadly and badly. On the month, the franc and AUD led with the buck trailing badly.

LATEST CFTC DATA showed growing USD short positions with the EUR and GBP long positions building. The EUR net long position expanded to 68.3K from 62.2K, the highest since Dec. 2007. The only currency in a net negative position versus the dollar was the yen but traders appeared to be rushing to the exits as the net position climbed to -37.0K from -53.0K. Speculative longs in AUD and CAD were trimmed but remain at extreme levels.

Soft economic data on Friday wasnt able to slow the CADs rise. Canadian GDP fell 0.2% after two consecutive months of 0.5% growth. Economists were expecting a flat reading but lackluster international trade (due to a strong C$) led to declines in manufacturing and wholesale sales. Economists still expect Q1 growth of 3.8% but the trend is slowing. CAD shook off the report as USD/CAD touched a fresh three year low and closed at the weekly low.

In the U.S., the Chicago PMI fell to 67.6 from 70.6 (exp: 68.5). The decline doesnt reinforce the larger drops we saw in other regional PMIs but places a downside risk on Mondays ISM report.

By AB - AshrafLaidi.com Staff