Speculators' net short dollar position surged to the highest since August 2011 in the latest week, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday. The value of the net short dollar position was $23.42 billion in the week ended April 17, compared with net shorts of $22.77 billion the previous week. Short-term investors have been short the dollar since mid-July last year.
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 short position equivalent to $28.18 billion, up from $27.21 billion the previous week.
US dollar positioning has reached an extreme that could lead to a pullback in short bets, especially given the greenback's recovery this week. The dollar index gained 0.6 percent this week, the largest weekly gain since late February. "There was not one, but four main catalysts for the US dollar's recovery this past week," said Kathy Lien, managing director of FX strategy, at BK Asset Management in New York.
She cited the rise in Treasury yields, softer global data, solid US retail sales and a more upbeat Beige Book report, including a generally quiet environment on the geopolitical front. Investors were overall relieved that US President Donald Trump did not escalate tensions in Syria after striking specific targets in that country, instead abandoning plans for more sanctions.
"If President Trump stays relatively quiet, US data beats (forecasts) and 10-year Treasury yields edge closer to 3 percent, the US dollar can extend its gains," Lien added. Euro net longs, meanwhile, rose to a record high of 151,476 contracts, CFTC data showed.
The single European currency ended the week on a sour note, however, slipping about 0.3 percent, its weakest weekly showing since mid-February. Next week should prove critical for the euro with the upcoming European Central Bank Monetary policy meeting. The ECB is not expected to move interest rates any time soon, but investors would be looking for further guidance on the potential timing of an end to the ECB's quantitative easing.
"Hawkish rhetoric will likely be constructive for the recently struggling euro, while dovish tones are likely to weigh further on the shared currency," said James Chen, head of research at Forex.com in Bedminster, New Jersey. Meanwhile, speculators' net short position on bitcoin Cboe futures rose to 1,883 contracts, up from 1,721 the previous week, data showed. This week's net short bitcoin futures were the largest since mid-February.
Bitcoin hit an all-time high of just under $20,000 in December 2017 and has since fallen to as low as $5,920. On Friday, it was up 3 percent on the day at $8,515 on the BitStamp platform. Cryptocurrencies overall have been pressured by concerns of a clampdown from regulators and fears they have been in a speculative bubble that is now contracting.
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