USD shorts continue to grow but are not stretched in aggregate. This reflects the particular concentration of USD shorts vs reserves. USD positioning momentum may cool, as the 3m momentum in USD futures positioning is at a level that typically points to mean reversion. JPY remains still long. EUR topside is persistent in options and stretched, but less long in futures. CHF longs have room to catch up. Flow wise it seems that the recent dislocations in the treasury market are more likely related to position unwinds by levered investors than significant real money (domestic or international) selling. Recent fund flow data suggests that investors did not exit US government bond funds altogether, but rather shifted from owning long-duration Treasury funds to short-duration funds. European investors are selling US equities in favor of repatriating back to European equities. Private investors have continued to net purchase US government bonds, shifting from long- to short-duration securities, but have net sold credit products. The recent rise in the Euro has clearly outstripped moves in rate differentials or relative equity prices—that should be expected, and should continue if we are correct about the underlying fundamental dynamics. On JPY there is a 24th April meeting between Japanese finance minister & US treasury secretary Scott Bessent which is likely to add a fx clause in the tariff agreement. Hence more upside for JPY in short term. CHF too is likely to see more strength as CHF futures positioning still remains significantly short leading to a possibility of short covering. On CNH, we remain of the view that it is range bound between 7.20-7.35 till more clarity emerges on the tariff front. We like to sell 7.60 calls in 1–3-month expiry.
