Hedge Funds Up Shorts In CAD by 70 Percent; Outflows Continue

Shorts in Canadian dollar just took a major rise over the last week, short contracts in CAD futures and options stood at 54,963 positions till Tuesday, 27 August. This is a 70% increase to total shorts held by hedge funds, categorized as leveraged funds, from the previous week.

hedge funds

CAD takes pressure from Syria and the Fed

CAD is also experiencing jitters over the looming Syria war which its immediate neighbour, U.S is heavily involved in. In addition, the imminent Fed meeting which could begin the process of tapering is also driving pressure towards the Canadian dollar.

In Canaccord Genuity’s latest weekly note on North American Portfolio Strategy & Quantitative Research, Martin Roberge discusses the valuation of Canadian dollar. He points out that foreign investors’ holdings in Candian bonds has declined by $9.2 billion in the last quarter and this marks the first outflow since 2008. Roberge says that the massive cut in foreign holdings is the major reason for CAD’s weakening which can aggravate in the coming period. Roberge writes,

“Over the past few years, the C$ has been driven by foreign bond flows; thus prospects of higher yields bode ill for our loonie (CAD). Who would have guessed that improving global growth would be negative for the C$?”

Hedge funds increase MXN shorts, GBP longs

Other than activity in CAD, shorts in Mexican peso also increased. Hedge funds now hold 59,189 short contracts in MXN, up from 48,727 last week. Hedge funds also added  10,564 long contracts in British pound, a 38% increase, days before Mark Carney spoke about keeping rates low.Total long contracts in GBP futures placed by hedge funds are at 37,934 positions while shorts stand at 57, 987 contracts.

Among tresuries, hedge funds were seen cutting long exposure in 10-year notes while short positions remained more or less steady at 211,779 contracts.

About the Author

Tabinda Hussain
Tabi covers hedge funds for ValueWalk. Although Tabi is an expert in hedge funds, her academic background is in Biology. Follow her on twitter @tabihussain