US dollar net shorts swell to largest in nearly 10 years

NEW YORK: US dollar net short positioning in the latest week ballooned to its largest since May 2011, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.

The value of the net short dollar position was $34.48 billion in the week ended Jan. 19, up from net shorts of $34.04 billion the previous week. Dollar net shorts have risen for five straight weeks.

US dollar positioning was derived from net contracts of International Monetary Market speculators in the Japanese yen, euro, British pound and Swiss franc, as well as the 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 short position of $35.315 billion, up from net shorts of $34.91 billion the week before.

The dollar’s weak trend persisted for most of the month as investors anticipated a global recovery that prompted investors to move out of safe havens and into riskier currencies.

The greenback so far this year has eked out a small 0.2% gain, after tumbling nearly 7% last year.

“One has to worry that expectations (about a recovery) may be too high and lead to disappointment, which means a correction lower in stocks, lower bond yields, and a move lower in the dollar,” said Anujeet Sareen, global fixed income portfolio manager at Brandywine Global Investment Management in Philadelphia.

In other currencies, euro net long contracts rose to 163,466, their highest since October of last year.

The euro was one of the outperformers last year against the dollar, surging 9%. But so far in 2021, the euro has posted a small 0.3% loss.

Some strategists are expecting a pullback in the euro amid downbeat eurozone data.

European countries are also struggling to contain the spread of the coronavirus amid worries that a new variant could lead to more stringent lockdowns and more economic pain.

In the cryptocurrency market, bitcoin net shorts declined to 3,129 contracts, compared with net shorts of 3,333.

Bitcoin this week fell 6% after hitting an all-time peak of $42,000 on Jan. 8. On Friday, bitcoin was up 9% though at $33,613.