Hedge funds turned almost all the bets on the ruble weakening

Large speculators, which are typically banks and hedge funds, in one week, eliminated almost all of the short positions (betting on a fall) of the ruble on the American stock exchange. Published in the Friday night weekly statistics Commission futures trading USA (CFTC) showed an unusual result: short futures positions on the exchange rate of the ruble to the dollar (traded on the Chicago stock exchange CME) fell by more than 13 thousand to only 654 contracts, minimum quantities, since the beginning of 2012.

Latest CFTC data reflect the situation on Tuesday, October 18 (ruble statistics are from the beginning of 2009). In the reporting week, speculators in the United States turned down bets on the ruble weakening, equivalent to 33 billion rubles, after which the “bears” in this market is almost gone.

But the bulls sixth consecutive week increase the number of bets on the strengthening of the Russian currency, resulting in net long position (the difference between the number of long and short positions is the main indicator of sentiment speculators) updated record to 31.9 thousand contracts (a week earlier it was 17.7 thousand).

The closure of hedge funds, 95% of the short positions on the ruble may be due to fixation losses, the ruble this year has appreciated by more than 15%, one of the best results in emerging markets. Friday night on the Moscow stock exchange for one dollar gave 62,37 RUB this week (25 and 28 October), the company must pay quarterly taxes, including VAT and profit tax, it has traditionally provided support for the rouble as exporters sell dollars. In 2017, the ruble may continue to strengthen, says Morgan Stanley. Although quotes annual forward contracts on the ruble assume its weakening, the head of Intermarket strategy Morgan Stanley’s Andrew sheets believes that the potential for ruble appreciation in the next 12 months have not been exhausted, given that the operation of carry trade with the Russian currency (earnings on the difference in interest rates) bring the most revenue after the Brazilian real.

The previous record for closing short positions on the ruble (5732 contract), which has now covered more than half, was dated from the week ended 16 December 2014. Then the speculators, on the contrary, took profits after the “black Tuesday” when the ruble plummeted to 80 rubles/$1.

However, a reduction of 13 thousand short positions of speculators over the last week, the mirror appears in almost the same increase in short positions in other categories of traders “commercial” or real business, which is hedging such currency risks. For example, such contracts could purchase a foreign company selling its products in Russia in rubles, to protect yourself from the weakening of the Russian currency.