Speculators' net short bets on the US dollar fell to their smallest in nearly three months, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday. The value of the dollar's net short position was $8.02 billion in the week ended October 24, down from net shorts of $12.65 billion the previous week. Investors have pared back net short bets on the dollar for four straight weeks.
Generally positive US data over the past month as well as hawkish rhetoric from the Federal Reserve that boosted expectations for a rate hike in December have boosted the dollar. The dollar on Friday rose to a three-month high, although on the year so far, it was still down 7 percent.
"Between the introduction of the tax bill on November 1 and the prospect of a Fed chair announcement before Trump takes off to Asia on November 3, we believe next week will be another good week for the US dollar," said Kathy Lien, managing director of FX strategy at BK Asset Management in New York.
The dollar's net positioning was derived from net futures contracts of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars. In a wider measure of dollar positioning that includes net contracts on the New Zealand dollar, Mexican peso, Brazilian real and Russian ruble, the US dollar posted a net short position valued at $10.72 billion, down from $16.33 billion the previous week.
Yen shorts, meanwhile, rose to their largest since July. The Japanese currency has been hampered by persistently low inflation. "(Japan) has a ton of different ways of measuring inflation, and all of them show basically the same story: no inflation after some 20 years of near-zero interest rates," said Marshall Glitter, chief strategist, at ACLS Global. The yen though was still up nearly 3 percent against the dollar.