NEW YORK: US dollar net shorts climbed this week to the highest level since late February, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.
The value of the net short dollar position rose to $27.89 billion in the week ended May 25, from net shorts of $15.07 billion the previous week. US dollar net short contracts rose for a sixth straight week.
US dollar positioning was derived from net contracts of International Monetary Market speculators in the Japanese yen, euro, British pound and Swiss franc, as well as the Canadian and Australian dollars.
In a broader measure of dollar positions that includes net contracts on the New Zealand dollar, Mexican peso, Brazilian real and Russian ruble, the greenback posted a net short position of $17.052 billion this week, compared with net shorts of $15.63 billion the week before.
Net short dollar positioning swelled again after it became clear that the Federal Reserve will keep its ultra-easy monetary policy stance for some time despite signs of rising inflationary pressure.
On Friday, data showed underlying inflation in the 12 months to April, as measured by the personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, climbed to 3.1%, far above the Fed’s 2% target.
The Fed has viewed rising prices as transitory amid a reopening economy that has seen increased Covid-19 vaccinations.
The US central bank’s view on inflation has stalled the rise in yields, weighing on the dollar.
Since late March, the dollar has lost nearly 4% of its value against a basket of currencies. It tracked the decline in yields during that period as well, with the benchmark US 10-year yield dropping nearly 20 basis points since late March.
“Currency traders are turning more negative on the broader outlook for the US dollar again,” said Scotiabank in a research note released after the CFTC data. The Canadian bank also pointed to the sharp increase in net gold longs, gaining $3.6 billion to return to late February levels, “in what is effectively another manifestation of broader US dollar bearishness.”
In the cryptocurrency market, bitcoin net shorts rose to 1,672 contracts from net shorts of 959 in the week ended May 18, which was the smallest net short since late March last year.
Bitcoin’s gains have slowed this year, after China embarked on a crackdown on cryptocurrency trading and mining. Investors also looked to other digital currencies such as ether, the digital token for the Ethereum blockchain, for crypto exposure.
Since hitting an all-time high just under $65,000 on April 14, bitcoin has fallen about 46%. On Friday, bitcoin was down 7% at $35,920.