Speculators increased bullish bets on the US dollar for a second straight week, pushing net long positions to their largest since mid-May last year, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.
The value of the net long dollar position rose to $11.03 billion in the week ended June 26, from $8.64 billion the previous week. US dollar positioning was derived from net 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 long position of $13.04 billion in the week of June 26, up from net longs of $10.38 billion the previous week.
That was also the largest net long positioning since mid-May, Reuters data showed. US dollar sentiment has improved over the last few months due to an improving economic backdrop and expectations for further gains have been reinforced after the Federal Reserve signalled two more interest rate hikes this year a few weeks ago.
"We think stronger US growth should keep the Federal Reserve on a hiking cycle with two more rate hikes this year and three more next year, which also should ultimately be supportive for the dollar," said Bank of America Merrill Lynch in a research note.
It added that US economic reports are consistently better than that of the euro zone and the bank expects this to continue for the rest of the year. Since hitting a more than three-year low in mid-February, the dollar index has rallied by more than 8 percent.
In the cryptocurrency market, meanwhile, speculators' net short position on bitcoin Cboe futures fell to 1,368 contracts from net shorts of 1,595 the previous week, the data showed. That was the smallest net short since bitcoin futures started trading on Cboe in December last year.
Bitcoin on Friday fell as low as $5,774.72 on Bitstamp, its weakest level since around mid-November. It recovered, however, from that 7-1/2-month low and was last up 1.1 percent at $5,910.01. So far in 2018, bitcoin has fallen 57.4 percent, after surging more than 1,300 percent last year.
"Crypto is suffering from a negative reflexivity cycle - the floundering prices, worsening technicals and poor liquidity are keeping crypto-investors cautious, which is worsening liquidity and further pushing down prices," said Thomas Lee, managing partner, at Fundstrat Global Advisors in New York.