Speculators pared bullish bets on the US dollar for a ninth straight week, as net longs fell to their lowest level since the third week of May 2014, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday. The value of the dollar's net long position sank to $5.75 billion in the week ended February 23, from $8.31 billion the previous week. It was the second straight week that net dollar longs came in below $10 billion.
The decline in oil and stocks as well as a slowdown in China have pushed back expectations for an interest rate hike by the Federal Reserve to some time next year. That's a negative for the dollar, prompting investors to liquidate most of their net long positions on the greenback. So far on the year, the dollar index has been down 0.6 percent, after posting gains in excess of 9 percent in 2015. In other currencies, investors pushed net long positions on the yen to their highest level in four years. The expectation is that the Bank of Japan won't do as much quantitative easing as the market expected.
Bank of Japan Governor Haruhiko Kuroda said last Tuesday that accelerating the pace of money printing alone would not boost expectations of future price rises and acknowledged the limits of what monetary policy can do to revive growth. The yen was also helped by its safe-haven qualities. The yen tends to struggle in times of increased risk appetite because it is often used to fund investments in riskier, but higher-yielding currencies. In times of market stress, investors typically sell those riskier assets and buy back the Japanese currency.
Net long contracts on the yen rose to 52,734 in the latest week from 47,901 the week before. That was the largest long position since February 2012. Meanwhile, this week's euro net shorts of 46,857 were the lowest since June 2014. The Reuters calculation for the aggregate US dollar position is derived from net positions of International Monetary Market speculators in the yen, euro, sterling, Swiss franc and Canadian and Australian dollars.
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