Speculators increased bullish bets on the US dollar for the first time in seven weeks, according to Commodity Futures Trading Commission data released on Friday and calculations by Reuters. The value of the dollar's net long position totalled $15.02 billion in the week ended February 21, up from $14.99 billion the previous week.
Despite the rise in the dollar's net long positioning, the greenback remains an underperformer so far this year, down about 1.1 percent, after gains of 3.6 percent in full-year 2016. Analysts said investors may have gotten ahead of themselves, buying the dollar in the aftermath of the election as US president of Donald Trump, who promised tax reform and infrastructure spending to boost the economy.
Roughly two months after Trump's election, the market remained in the dark on the new government's fiscal measures and tax plan. "We think the dollar should be trading higher, but there's no question that investors need more convincing," said Kathy Lien, managing director of FX strategy at BK Asset Management in New York.
She also added that investors were just not convinced that a US interest rate hike will happen next month. CFTC data also showed net shorts of 50,162 Japanese yen contracts, the lowest in more than two months. The yen has gained more than 4 percent so far this year, capitalizing on the US dollar's struggles. Trump is expected to give a major speech next week before a joint session of Congress. Lien said any policy announcement could dictate how dollar/yen moves next week.
"The currency pair came under heavy selling pressure in previous days and looks vulnerable to a deeper correction," she added. The Reuters calculation for the aggregate US dollar position is derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars.