Speculators' net short bets on the US dollar in the latest week shrank to a six-week low, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday. The value of the net short dollar positions - derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars - totalled $8.19 billion, in the week to Feb. 13.
That compares with a net short position of $12.93 billion the previous week. To be short a currency means traders believe it will fall in value. 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 $12.03 billion, compared with $17.0 billion a week earlier.
"Whenever you have instances of higher risk aversion you might see flows coming back into the dollar," said Sireen Harajli, a currency strategist at Mizuho in New York. Higher-risk assets took a beating last week as investors grappled with increased volatility across markets. The dollar index, which measures the greenback against a basket of six major currencies, rose 1.4 percent last week to notch its best weekly performance since November 2016.
The index gave up all those gains this week and hit a fresh three-year low on Friday. "Our view is that the dollar is going to be trading on the defensive this year," Harajli said. Worries about the US budget deficit are expected to weigh on the greenback, Harajli said. Meanwhile, speculators' net short position on bitcoin Cboe futures fell to 1,875 contracts, down from a net short position of 2,040 contracts in the prior week, the data showed. Bitcoin rose above $10,000 on Thursday for the first time in more than two weeks, as investors bought back the digital currency after it had fallen 70 percent from its all-time peak hit in mid-December.
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