14

In this WSJ article, it comments

Traders held a net $22.6 billion in bets that the dollar will appreciate, a gain of 31% in net wagers over the previous week and the largest such position since June 2010

and

Speculators trading the yen held a net $10.2 billion in bets that the currency will decline

I'm not sure I understand what this is saying.
If you are shorting the yen, you would borrow yen and buy another currency, say Swiss Franc with the money, right?

Does this article add up all other currency crosses to get the 'net' figure?
So they don't care what it is depreciating against?

For example if Annie is short $7.8 billion worth of yen with a Yen/Euro trade, and Johnny is short $2.6 billion yen with a Yen/Aussie trade, and Carlos is long with a yen/USD $200 million trade - is that the figure they are quoting? The sum of all the yen trades?

Kirill Fuchs
  • 6,116
  • 38
  • 64
DefenestrationDay
  • 292
  • 1
  • 9

1 Answers1

10

When trading Forex each currency is traded relative to another. So when shorting a currency you must go long another currency vs the currency you are shorting, it seems a little odd and can be a bit confusing, but here is the explanation that Wikipedia provides:

An example of this is as follows: Let us say a trader wants to trade with the US dollar and the Indian rupee currencies. Assume that the current market rate is USD 1 to Rs.50 and the trader borrows Rs.100. With this, he buys USD 2. If the next day, the conversion rate becomes USD 1 to Rs.51, then the trader sells his USD 2 and gets Rs.102. He returns Rs.100 and keeps the Rs.2 profit (minus fees).

So in this example the trader is shorting the rupee vs the dollar.

Does this article add up all other currency crosses to get the 'net' figure? So they don't care what it is depreciating against?

This data is called the Commitment of Traders (COT) which is issued by the Commodity Futures Trading Commission (CFTC)

In the WSJ article it is actually referring to Forex Futures.

In an another article from CountingPips it explains a bit clearer as to how a news organization comes up with these type of numbers.

according to the CFTC COT data and calculations by Reuters which calculates the dollar positions against the euro, British pound, Japanese yen, Australian dollar, Canadian dollar and the Swiss franc.

So this article is not talking about futures but it does tell us they got data from the COT and in addition Reuters added additional calculations from adding up "X" currency positions.

No subscription needed: Speculators Pile Up Largest Net Dollar Long Position Since June 2010 - CFTC

Here is some additional reading on the topic if you're interested:

CFTC Commitment of the Traders Data – COT Report

FOREX : What Is It And How Does It Work?

Futures vs. Forex Options

Forex - Wiki

Kirill Fuchs
  • 6,116
  • 38
  • 64