Speculators reduced bullish bets on the US dollar to their lowest in four months, cutting net longs for a sixth straight week, according to Commodity Futures Trading Commission data released on Friday and calculations by Reuters. The value of the dollar's net long position totalled $14.99 billion in the week ended February 14, down from $17.07 billion the previous week. The latest dollar positioning was the lowest since the week ended October 11. The dollar has underperformed so far this year, falling 1.2 percent against a basket of currencies, after gains of 3.6 percent in 2016.
The dollar has been hurt by a combination of comments from the Trump administration about preference for a weaker dollar as well as mixed US economic data suggesting growth in the world's largest economy may not be as strong as many initially thought. The greenback's soft trend so far in 2017, however, is not expected to last long with a Federal Reserve in the midst of an interest rate hiking cycle. Fed Chair Janet Yellen earlier this week affirmed the US central bank's commitment to raising interest rates multiple times this year, noting that "every FOMC (Federal Open Market Committee) meeting is a live meeting."
"It is only a matter of time before the dollar resumes its rise," said Kathy Lien, managing director of FX strategy at BK Asset Management in New York. "The (dollar) bulls could be hanging back until President Trump announces his 'phenomenal' tax plan," she added. CFTC data also showed net shorts of 51,284 Japanese yen contracts, the lowest in more than two months. The yen has gained 3.5 percent so far this year as the US dollar struggled. The Japanese currency's movements have been mostly tied to the greenback's outlook.
"The inability of US bond yields to hold onto recent gains highlights the fading confidence surrounding the administration's ability to enact swift and meaningful fiscal legislation," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.