Speculators pared favourable bets on the US dollar for a fourth straight week, shaving net longs to their lowest in seven weeks, as investors remained uncertain on whether the Federal Reserve would raise interest rates this year. The value of the dollar's net long position fell to $6.34 billion in the week ended August 23 from $9.81 billion the previous week, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday. This week's net long position was the smallest since early July.
Investors continued to grapple with the Fed's tightening time line, as they pored over US data and parsed every comment from US central bank officials on clues as to when rates might rise. For the last few weeks, the dollar has been trading weaker as US data came out mostly mixed, even as most Fed speakers flagged a rate hike at least once this year going into Friday's speech by Fed Chair Janet Yellen.
Even while Yellen and Fed Vice Chair Stanley Fischer tag-teamed on Friday to signal that rates could rise again this year, some dollar bulls remained unconvinced. "Certainly, the discussion about raising rates offers an initial, hawkish hue to her speech, but the broader implication that the Fed's cyclical peak in rates will be lower than previously anticipated - real neutral rate is near zero and inflation won't reach 2.0 percent for a few years - has hurt the US dollar," said Christopher Vecchio, currency analyst at DailyFX.com in New York.
So far this year, the dollar index has fallen more than 3 percent, down from 2015's gains of more than 9 percent Sterling net short positions, meanwhile, edged up to 94,978 contracts, another record high, the data showed. The pound's net short position has hit record highs for six straight weeks. The UK currency has been buffeted by actions of the Bank of England a few weeks ago when it cut interest rates and restarted bond purchases in a move to mitigate the impact of Britain's vote to exit the European Union.
Since Britain's vote on June 23, the pound has fallen nearly 12 percent against the dollar. Data also showed that speculators raised net long positions on the yen to 60,316 contracts, their highest since early July. BNY Mellon's data showed that the yen has been the most bought G10 currency over the last two weeks. The bank said yen inflows this month were five times stronger than the average flows for the Japanese currency in the past year. 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.