Bank of America analyzes FX flows and positioning at the end of Q3, highlighting a neutral stance on the USD while investors favored long positions in AUD and maintained shorts in CAD, CHF, and SEK.
Key Points:
Market Positioning:
- At the end of Q3, the market was neutral on USD, long on AUD, and short on CAD, CHF, and SEK, with other positions remaining relatively light.
Investor Behavior:
- Investors reduced their long positions in USD while increasing holdings in JPY, EUR, and GBP. They also sold NZD and continued to decrease their NOK longs.
Hedge Fund Strategies:
- Hedge Funds concluded Q3 long on Scandies, USD, and AUD while holding short positions in CAD, NZD, and GBP. They sold USD, CAD, and GBP, while buying EUR, CHF, and NZD.
Real Money Positioning:
- Real Money clients ended long on GBP and AUD, and short on NZD, Scandies, and CHF. They were less aggressive than Hedge Funds, with lighter net flows.
Options Market Dynamics:
- In the options market, investors were significantly long on AUD and EUR, and heavily short on JPY and SEK.
Conclusion:
Overall, the positioning data for Q3 reflects a shift in market sentiment, with a neutral stance on the USD and strong preferences for AUD, while CAD, CHF, and SEK faced short positions. Hedge Funds exhibited more aggressive strategies compared to Real Money clients, who maintained a more cautious approach.
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