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Speculators grab the attention of currency markets

As the US dollar continues to flounder in the currency markets it has come to the attention of the wider masses that a further $10 billion in short positions was taken out in the week ended September 28 which brings the total value of short positions in the US currency to just over $26 billion. These are enormous figures and perfectly reflect the fact that speculators appear to be very active within currency markets and have taken a very negative attitude towards the dollar.

There was some respite for the ongoing devaluation of the dollar today amid signs that speculators may well be looking to shave their positions in the short to medium term. Currency markets are likely to be very volatile in the future due to the excess of short positions which are effectively trades where the currency has been sold in the hope of buying it back lower down - even though "investors" do not actually hold the currency.

If for some reason we were to see surprise upbeat economic data from the US this may lead to a significant rebound in the US currency very quickly as "shorters" would potentially look to close their positions. There has been concern regarding shortselling in an array of investment markets for some time but effectively if those undergoing shortselling get it wrong then the markets will in due course correct themselves.

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