In a new report, MacNeil Curry, CFA, CMT of BAML notes  hedge fund buying of the Euro against the dollar. The currency of the troubled continent appears to be viewed as a safe haven once again. However, because this report is based on data from before the massive selloff, it could prove to be premature to call the Euro a favored currency. According to Curry, Large speculators aggressively bought euro to a net long of $2.7bn from a net short of -$1.0bn notional last week. Positioning moved to a net long for the first time since February 2013. Hedge funds reduced their net long US $ Index positions to $1.2bn from $3.5bn notional. Positioning moved out of a crowded long. The US dollar has resumed its 2yr bull trend following the rally.

Hedge-funds-buy-euro-usd

Short strategies bought market exposure last week, while Macro hedge funds slightly reduced their net long positions to the S&P 500 (INDEXSP:.INX) and NASDAQ. Long Short exposure remains below benchmark. Both Market Neutral and Long Short strategies leaned further toward disinflationary expectations.

Ahead of last week’s Fed meeting, Large speculators sold the USD index out of a crowded long and turned net long EURUSD. They sold Wheat into a crowded short. Data are as of last Tuesday (June 18). Investable Hedge Fund Composite Index down 1.03% month-to-date The Investable Hedge Fund Composite Index was down 1.03% for the month, as of June 19, worse than the S&P 500 index’s price return of down 11bps. Convertible Arbitrage & Merger Arbitrage performed the best, up 0.19% and down a mere 0.04%, respectively. The Managed Futures category performed the worst, falling 2.36%. For details, refer to the weekly performance of the investable index and monthly performance data of the Global Diversified Hedge Fund Index on
pages 15-19.

Examining Hedge Funds Positioning By Major Strategies

Examining hedge fund positioning by major strategies BAML models indicate that Market Neutral increased market exposure to 3% net long from 5% net short. Equity Long/Short also raised market exposure to 23% net long from 18%, still below the 35-40% benchmark level. Macro funds slightly reduced their long exposures to the S&P 500 (INDEXSP:.INX), NASDAQ-100 (INDEXNASDAQ:NDX) and commodities, while selling US Dollar index and buying 10-yr Treasury notes. Overseas, they increased EAFE long exposure, but reduced EM exposure. Significant Hedge fund moves across asset classes, based on CFTC data Equities. Large specs slightly bought the S&P 500, NASDAQ-100 (INDEXNASDAQ:NDX) and Russell 2000. S&P 500 remains on the edge of a crowded long.

Agriculture. Large specs sold soybean and corn, while continuing to add to their shorts in wheat. Wheat moved into a crowded short.

Metals. Large specs sold gold, platinum and palladium, were flat in silver, and added to their copper shorts. Gold and silver remain in the buy zone .

Energy. Large specs bought crude oil and gasoline, added to their shorts in natural gas, but partially covered heating oil. WTI crude oil remains in a crowded long; heating oil remains a crowded short.

FX. Large specs sold US $ Index, partially covered Yen, and aggressively bought Euros to a net long for the first time since February 2013. The US dollar moved out of a crowded long.

Interest Rates. Large specs bought 30-year, 10-year and 2-year Treasuries. Readings are neutral.