Speculators cut negative dollar positions to lowest since July

Speculators cut their bearish bets on the US dollar for the seventh straight week, with the net negative value of positions against the greenback falling to a four-month low. Calculations by Reuters of data from the Commodity Futures Trading Commission (CFTC) showed bets on the dollar totalled negative $643 million, the lowest since mid-July when speculators held a net-positive position in the dollar.
Short bets against the dollar have extended their decline as the year has progressed and bets on another US interest rate increase from the Federal Reserve have been almost entirely priced into the dollar. Fed funds futures rates show market investors see a 91.5 percent chance of a rate hike at the Fed's next meeting in December, raising the US overnight interest rate to 1.25-1.50 percent, while 8.5 percent see an increase to 1.50-1.75 percent and zero percent of investors see the rate remaining at its current 1.00-1.25 percent level.
Speculators' net short position in the Japanese yen grew to its largest since December 2013 as traders continued to bet that the yen would fall. Investors' preference for borrowing at low rates in one currency to invest in another with higher returns creates selling pressure on low-yielding currencies such as the yen. To be long a currency means making a bet that the currency will appreciate, while to be short a currency means betting that it will depreciate in value.
The Reuters calculation for the aggregate US dollar position is derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars. In a wider measure of dollar positioning that includes net contracts on the New Zealand dollar, Mexican peso, Brazilian real and Russian ruble, the US dollar posted a net short position valued at negative $2.41 billion, compared with negative $3.69 billion a week earlier. That is the closest speculators' bets on the dollar have been to even in that metric since they were net-positive on June 30.