Speculators trimmed their bearish bets on the US dollar for a second straight week but retained a significantly negative bias against the greenback, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday. The value of the dollar's net short position, derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars, was $15.42 billion, in the week to October 10.
That compares with a net short position of $16.83 billion the previous week and marks the thirteenth straight week that investors have had a net short position on the greenback. To be short a currency means traders believe it will fall in value. 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 $19.28 billion, down from $21.01 billion a week earlier.
The dollar has come under pressure this year, hit by US President Donald Trump's inability to pass proposed tax cuts and infrastructure spending plans through Congress, which were expected to boost growth and inflation and increase the pace of interest rate hikes by the Federal Reserve. Unless there is a loss of momentum in other markets, speculators are unlikely to give up on their negative bias against the dollar, said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments in Toronto.
Schamotta, however, warned that speculators could get hurt if there is any progress with the Trump administration's tax reform agenda over the next three weeks. Trump is considering a variety of choices to replace current Fed Chair Janet Yellen, whose term on the Fed expires on January 31. Former Fed governor Kevin Warsh is seen by traders as the current frontrunner to succeed Yellen.
In light of his past stance against expansion of the Fed's balance sheet, Warsh is seen as more hawkish than Yellen, analysts said. Meanwhile, the net short position in the Japanese yen grew to 101,419 contracts, the largest since early August.
Comments
Comments are closed.