Bloomberg News

Dollar Longs Are Most ‘Extreme’ Since 2010, Morgan Stanley Says

January 09, 2012

Jan. 9 (Bloomberg) -- Bets on dollar strength have reached “extreme” territory for the first time since March 2010, according to Morgan Stanley, citing an aggregate measure including client flow data and market futures positions.

Buying of the U.S. currency last week by Morgan Stanley’s clients reached the 85th percentile of the past two years, Calvin Tse, a London-based currency strategist at the company, said in an interview. Euro short positions increased, with currency trading by Morgan Stanley clients reaching the 40th percentile, below the 50th percentile mark that tends to separate net selling from buying, Tse said.

“This is the first time dollar positioning has been in extreme long territory since March 2010,” Tse wrote in a report to clients published today.

The dollar has rallied as slowing global growth and Europe’s debt crisis damped demand for other nations’ currencies and increased the appeal of the world’s reserve tender.

The U.S. currency rose 1.9 percent to $1.2717 per euro last week in its biggest five-day advance since Dec. 16. The dollar depreciated 0.2 percent to $1.2742 at 10:15 a.m. in New York. Against the yen, the dollar fell 0.2 percent to 76.85.

Futures trading on the International Monetary Market showed net dollar long positions reached 126,909 contracts in the week ended Jan. 3, according to the Commodity Futures Trading Commission. The measure, which aggregates dollar positions against the yen, euro, Australian dollar, Swiss franc, Canadian dollar, pound, Mexican peso and New Zealand dollar, rose to a record high 166,591 contracts on Nov. 29.

European Talks

German Chancellor Angela Merkel and French President Nicolas Sarkozy held talks in Berlin today to flesh out a new rulebook for fiscal discipline negotiated at a Dec. 9 summit that seeks to create a “fiscal compact” for the euro area. The region has bailed out three nations as its sovereign-debt crisis roiled investor confidence.

Industrial production in Germany, Europe’s biggest economy, dropped 0.6 percent in November after a 0.8 percent increase in the previous month, a report showed today.

--Editors: Dennis Fitzgerald, Greg Storey

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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