Speculators lifted favourable bets on the US dollar for a third straight week, with net longs hitting their highest in more than eight months, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday. The value of the dollar's net long position rose to $14.72 billion in the week ended October 11, from $10.52 billion the previous week.
The dollar has been underpinned by recent strong US economic data that cemented expectations of an interest rate hike by the Federal Reserve at its December monetary policy meeting. So far this month, the dollar index is up 2.7 percent, on pace for its best monthly percentage gain since May. "We are bullish US dollars but it will be important to watch Treasury yields - if they fall, the dollar could experience losses, but if 10-year yields hit fresh four-month highs, we can expect strong gains in the greenback," said Kathy Lien, managing director of FX strategy at BK Asset Management in New York.
Sterling net short positions, meanwhile, dipped to 95,470 contracts from the previous week's record high of 97,572, data showed, the flash crash event last Friday having a relatively minor impact on positioning in the currency. The pound has been on a downward spiral on growing worries Britain would opt for a "hard" exit from the European Union. Sterling so far this year has lost more than 17 percent of its value against the dollar. Speculators have been short the pound since November last year.
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