Australian dollar shorts annihilated

Early last week I noted the extreme positioning for Australian dollar shorts on the Chicago Commitment of Traders (COT) report and that such loaded shorting usually marks a bottom for the currency. If you’re wondering how it was that the Aussie went from trading in the $75 to $78s in a day, here’s the updated COT report for the Aussie from Friday:

That’s a one week annihilation of Aussie shorts down nearly 50k to 28.8k from 76.9k as the dovish Fed triggered a tsunami of covering. It appears the big speculators were wildly long Fed hawkishness and took an historic shellacking.

Australian bonds also posted new all-time lows on Friday night at the short end, with the two year fully pricing two more rate cuts for the first time at 1.75%:

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.