Euro Ends 2011 With a Whimper, Net Shorts Hit Record

The euro wilted again on the final trading day of 2011, falling to a 10-year low against the yen. AUD and JPY were the best performers on the day; EUR was the worst. The CFTC Commitments of Traders report showed the net short at a fresh record.

The focus was on the Spanish government Friday as they unveiled plans to cut 8.9B euros of spending. Officials also revised deficit estimates higher -- to 8% of GDP from 6% -- in what has become a familiar PIIGS occurrence.

Heading into the new year, the deficit miss was a reminder of the impossible position facing several eurozone countries. They must cut deficits but cant afford the slowdown in growth from cutting spending.

EUR/JPY broke below 100.00 for the first time in 10 years and closed at the daily low of 99.50. EUR/USD fared better, climbing to 1.2999 on a spurt of buying at the London fix only to slip back to 1.2948 at the close.

Flows and positioning were clearly a factor as accounts were shuffled at year-end. The S&P 500 fell 0.4% to close at 1257 precisely the same level where it opened the year.

CFTC COT Report

Non-commercial traders continued to buy US dollars in the report for the week ending Dec 27. The net USD position grew to +$20.35B from +$17.65B a week earlier. The bulk of the gains were against the euro as it fell to a record -128K from -114K last week. Other changes:

JPY -2K to +22.6K

GBP -3K to -29.1K

CAD +5K to -21.8K

AUD +7 to +37.2K

NZD +1K to +1.4K

Thanks for making it a great year at Intermarket Strategy. We wish you all the best in 2012!