Speculators bolstered bullish bets on the US dollar in the latest week, as net longs climbed to their highest in more than two months, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday. The value of the dollar's net long position rose to $28.07 billion in the week ended November 3, from $21.6 billion the previous week. That was the largest net long position since mid-August, with investors increasing long contracts for a second consecutive week.
To be long a currency is to make a bet it will rise, while being short is a bet its value will decline. The dollar regained momentum last week after the Federal Reserve, in its statement after keeping interest rates steady, said the US central bank was considering a hike at its next policy meeting in December depending on the strength of economic data. That was followed by more hawkish comments this week from Fed Chair Janet Yellen and New York Fed President William Dudley, who both pointed to a possible rate hike next month, but said the pace of tightening would be gradual.
A much stronger-than-expected US jobs report for October also boosted the chances of a rate increase next month. As a result, interest rate futures have now priced a 70 percent chance the Fed will raise borrowing costs next month, for the first time since 2006, according to the CME Group's FedWatch. The end-result was a much stronger dollar, which hit its highest in nearly seven months against a basket of currencies on Friday. So far this year, the dollar has gained nearly 10 percent. In other currencies, net short positions on the euro increased to a five-month high of 134,334 contracts, from 105,934 the previous week. Speculators also turned bearish on the Swiss franc, with net shorts hitting a two-month peak. The Reuters calculation for the aggregate US dollar position is derived from net positions of International Monetary Market speculators in the yen, euro, sterling, Swiss franc and Canadian and Australian dollars.