US dollar net longs fall after near 2-year high in previous week

Parvez Jabri December 15, 2018

NEW YORK: Speculators pared back net long bets on the US dollar after a nearly two-year high the previous week, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.

The value of the net long dollar position was $28.48 billion in the week ended Dec. 11, compared with $31.12 billion the previous week. The speculative market has been long on the dollar since mid-June.

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 broader 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 $28.84 billion, compared with $32.09 billion week earlier.

After extreme positioning the previous week, dollar net longs pulled back, dropping after three straight weeks of increases.

The decline in net long positions is now consistent with growing bearishness in the dollar, as investors have repriced rate hike expectations to reflect a more dovish Federal Reserve worried about tame inflation and external factors such as the US-China trade saga.

Market participants increasingly believe the Fed will still hike rates next week, but will likely pause and become more data dependent.

“We think there is a possibility that the days of the dollar’s reign as king of FX could be numbered,” said Fawad Razaqzada, analyst at FOREX.com in London.

“The Fed may very well signal a pause in near future rate hikes after potentially tightening its belt one more time next week, owing in part to ongoing uncertainties.”

In the cryptocurrency market, speculators’ net short position on bitcoin Cboe futures totaled a record low of 913 contracts in the latest week, down from 976 the previous week, data showed.

Bitcoin, however, remains enmeshed in a protracted slump that began earlier this year.

On Friday, bitcoin was down 2.8 percent at $3,170.41 on the Bistamp platform. It has lost nearly 80 percent of its value so far this year.

Copyright Reuters, 2018

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