Currency speculators boosted bets against the US dollar to the highest in two months in the latest week, according to data from the Commodity Futures Trading Commission released on Friday. The value of the dollar's net short position rose to $35.01 billion in the week ended May 3, the highest level since the week ended March 8, from net shorts of $27.75 billion a week earlier, according to CFTC and Reuters calculations.
Euro long positions rose to 99,516 contracts in the latest week, the highest since July 2007, from 68,279 contracts the previous week. Expectations the Federal Reserve will keep interest rates low while the European Central Bank raises them have pressured the dollar in recent months. The ECB raised rates for the first time since July 2008 last month.
Next week the CFTC will likely report a drop in dollar shorts given strong gains in the greenback late in the week. The euro dropped sharply after the ECB President Jean-Claude Trichet on Thursday signalled a rate hike was not likely next month, but left the door open for a move in July. The euro fell to a more than two-week low on Friday and headed for its worst week against the dollar since January.
Some traders, though, said the euro is still likely to gain against the dollar in the medium term, as euro zone interest rates are still expected to rise much more quickly than those in the United States. Speculators trimmed bets against the yen, while they also pared positions in favour of further gains in commodity currencies such as the Canadian and Australian dollars. To be short a currency is to bet it will decrease in value, while being long a currency is a bet its value will rise. The Reuters calculation for the aggregate US dollar position is derived from the net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc, Canadian and Australian dollars.
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