US dollar net longs hit highest since late January

Speculators increased favourable bets on the US dollar for a fifth straight week, with net longs touching their highest since late January, 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 $18.81 billion in the week ended October 25, from $18.44 billion the previous week. US dollar net longs have exceeded $10 billion for four consecutive weeks.
The dollar continues to be underpinned by a widely expected interest rate hike by the Federal Reserve at the December policy meeting. Friday's data showing that US gross domestic product for the third quarter rose 2.9 percent, the fastest pace in two years, supported rate hike expectations. So far this month, the dollar index has risen 3 percent. "The US dollar continues to move from strength to strength, but unlike the case earlier this year, we are not seeing this rally occur against a backdrop of heightened global risk aversion," said Viraj Patel, senior FX strategist, at ING in London.
The market, however, has been long the dollar for 23 straight weeks and could be poised for a pullback especially in the wake of much more positive news out of Britain and the euro zone.
The euro net short position, meanwhile, hit its highest level in roughly nine months at 123,856 contracts this week, data showed. Kathy Lien, managing director for FX strategy at BK Asset Management in New York, said the euro/dollar appears to have bottomed after falling to a seven-month low this past week. "We could see $1.10 (in euro/dollar) but further gains should be limited as we expect dollar bulls to remain in control at the start of the week," she added.
Sterling net short contract continue to decline to 83,962 contracts, the smallest since late September. Short contracts on the pound have fallen four straight weeks. 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. Japanese yen net long - 44,595 Euro net short - 123,856 Swiss Franc net short - 18,700 Sterling net short - 83,962 Australian dollar net long - 31,923 Canadian dollar net short - 13,324.