Data from CFTC shows that investors took the week ending on June 4 to reduce their crowded bets in financial futures. One of the most significant reversals was seen in long exposures in the Mexican peso by hedge funds and CTAs, which are categorized as ‘leveraged funds’ by CFTC. Investors pulled long contracts in MXN futures and options from 113,830 positions to 80,873 contracts, roughly a 30 percent cut.

Hedge funds cover Euro shorts

As we have noted before, MXN has been hurt the most by the USD’s strength. The currency has plummeted from 12.11 against the USD to 12.85 in less than a month, squarely landing on the same price it started the year with and detracting 7 percent against the USD in the last 3o days. The Mexican peso is expected to lose more ground if the Fed indeed tapers off QE, which has led to an aggressive sell-off. Peso’s three month historic volatility is now at a nine month high, reports Bloomberg.

Hedge Funds Pull Back on Euro Shorts

On the week ending on June 4, hedge funds slashed their short bets in Euro futures and options from 102,126 contracts to 72,277 positions. BAML’s hedge fund monitor reports that short bets were reduced by 38 percent from 10.9 billion to 6.8 billion notional. Positioning in the euro moved out of a crowded short zone after briefly entering it in the previous weeks. The significant reduction in euro shorts came in anticipation of Mario Draghi’s monthly ECB press conference on June 6. Since then EUR has strengthened from 1.3081 to 1.326 against USD.

Hedge funds: JPY Shorts Covered, AUD Added

On the other end shorts in JPY futures were also pared, as leveraged funds reduced shorts from 103,555 to 88,484 contracts. Positioning in yen futures has been trading at the brink of a crowded short zone since the announcement of unlimited easing from BoJ.  This is the first time in the last couple of weeks that in aggregate the shorts were dialed back. Further paring of short bets is expected to have occurred in this week as well, as JPY strengthened against USD and PM Shinzo Abe’s structural reforms failed to woo investors.

As for AUD, the hot new short, more and more bears keep jumping in. Short contracts in AUD futures and options are now at 77,837 contracts, after adding another 6,426 shorts over the week. Meanwhile long positions are being decreased as well, till last Tuesday, leveraged funds had cut down on longs by almost 20 percent, down to 43,299 contracts from 53,775 such positions.