International Money Market currency speculators increased bets against the dollar in the week to September 5, data released on Friday showed, mostly due to increased positioning in favour of the Australian dollar.
Net short dollar positions against six major currencies were upped to $15.1 billion, data from the Commodity Futures Trading Commission showed, up from $14.3 billion the prior week.
Accounting for much of that move was an increase in net long Australian dollar positions to 47,946 contracts to the tune of $3.7 billion. Bets in favour of the Aussie currency amounted to $2.54 billion the prior week.
The CFTC data on speculative positioning are often used by analysts as an indicator of future market direction. For example, extreme net short or long positions in a currency often suggest a rebound is imminent because dealers might be uneasy about keeping such a large position open.
Indeed, strategists said that helps explain why the dollar index, which measures the greenback against a basket of major currencies, exited New York trade on Friday having posted its best weekly gain in two months.
"In the washout of dollar shorts (since September 5), Aussie longs had been built up aggressively," said Richard Franulovich, currency strategist at Westpac Banking Corp in New York.