© Reuters. FILE PHOTO: U.S. dollar banknotes are seen on this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
By Jamie McGeever
ORLANDO, Florida (Reuters) – Hedge funds minimize their internet quick dollar place by almost $5 billion final week, based on the newest U.S. futures markets knowledge, the most important swing in direction of a extra bullish dollar stance since May final 12 months.
The transfer away from a bearish dollar place and the dollar’s rally during the last couple of months, nonetheless, have been so regular {that a} interval of consolidation or profit-taking reversal should absolutely be looming.
Commodity Futures Trading Commission figures present that the worth of funds’ quick dollar place in opposition to G10 currencies plus the Mexican peso and Brazilian actual fell to $2.25 billion within the week to September 12 from $7.17 billion the week earlier than.
It was sixth week out seven that speculators have turned extra bullish on the dollar – or much less bearish, should you favor – and they’re now on the verge of flipping to an outright internet long place for the primary time since November.
The dollar-positive shift, in gentle of resilient U.S. financial knowledge, bond yields and charge expectations – nominally and relative to main friends – has been fairly fast.
Less than two months in the past, funds’ had been internet quick of {dollars} to the tune of $21.3 billion, the most important wager in opposition to the dollar since June 2021.
Speculators’ internet quick dollar place in opposition to simply the G10 currencies, which was price $18 billion as lately as July, has now fully evaporated.
A brief place is actually a wager an asset’s worth will fall, and a long place is a wager it’ll rise. Hedge funds usually take directional bets on currencies, hoping to get on the proper facet of long-term tendencies.
This is broadly mirrored in CFTC positioning cycles.
The greatest transfer within the newest week was within the euro. Funds minimize their internet long holdings by 23,151 contracts to 113,080 contracts, the smallest internet long since November and the most important week-on-week discount since June final 12 months.
The European Central Bank’s ‘dovish hike’ final week may encourage additional long liquidation from the speculative neighborhood, whose place continues to be successfully a $15 billion wager that the euro will rise.
But ECB hawks are banging the drum that no extra charge hikes doesn’t imply charges will likely be minimize any time quickly, and once more, fatigue could set in – funds have minimize their internet long euro place 14 weeks out of the final 17.
The euro has now weakened in opposition to the dollar for 9 weeks straight, its worst weekly run for the reason that forex was launched in 1999.
The flip facet is the , a measure of the dollar’s worth in opposition to a basket of main currencies, is up 9 weeks in a row, its finest run since 2014.
The newest CFTC knowledge confirmed that funds are nonetheless holding a big internet quick yen place price $8.4 billion, a place that hasn’t modified a lot over the previous couple of weeks.
The Bank of Japan and U.S. Federal Reserve coverage conferences this week, nonetheless, may give the yen and dollar clearer path into 12 months finish.
(The opinions expressed listed here are these of the creator, a columnist for Reuters.)
