FX market is positioned very short NZD
• Our BNP Paribas Positioning Analysis reports that NZD is the second largest short among G10 currencies at -19 (on a scale of -50 to +50).
• From a historical perspective, short NZD reached an extreme of -23 in August 2014 but has now started to moderate (Chart 2).
• Previously, short NZD exposure reached a peak of -24 in June 2013 and -22 in August 2013 before rebounding strongly both times. That same risk exists now.
CAD one of the biggest gainers
• CAD positions have extended further into long territory, as investors start to build up CAD positions after the moderately net short position seen in mid-August 2014.
• The move has been broad based, with every subcomponent showing CAD buying on the week, with no sections of the investor community significantly underweight the CAD.
• There is plenty of room for investors to add to current long CAD positions.
FX G10 positioning remains muted
• Our latest BNP Paribas FX Positioning update shows the level of overall G10 positioning remains muted following the quick build up to the long-term average levels in the first few days of September.
• As we have discussed in past research, this time of year normally sees positions build.
• The recent correction means there is now more room to add risk if momentum returns to key favourite trades.
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