Speculators raise long US dollar bets to highest since late January

Speculators bolstered bullish bets on the US dollar, pushing net longs to their highest since late January, according to Commodity Futures Trading Commission data released on Friday and calculations by Reuters. The value of the dollar's net long position totaled $17.59 billion in the week ended March 14, up from $15.26 billion the previous week. Net long positions on the dollar rose for a third straight week.
Net long dollar positioning grew on the expectation of an interest rate hike in March, which was not the case a few weeks ago. At the beginning of the year, the market had priced in a rate increase in June at the earliest. Then, a series of comments from Fed officials opened the possibility of a March rate tightening. The Fed did raise rates on Wednesday, but the dollar came under pressure when it stuck to its forecast for three hikes this year.
Dollar/yen has been particularly vulnerable, falling more than 2 percent since the Fed hiked rates on Wednesday. Analysts said they thought the dollar would bounce back after a short stumble. "The Fed is still the only major central bank planning to raise interest rates," said Kathy Lien, managing director of FX strategy at BK Asset Management in New York.
For dollar/yen, Lien thinks the downside is limited because a number of Fed officials speaking next week will probably remind everyone that interest rates are still moving higher. Net shorts on the Japanese yen, meanwhile, also rose to 71,297 contracts, the highest since mid-January, data showed. The Bank of Japan also held a policy meeting this week and stuck to its ultra-easing policy. As widely expected, the BOJ maintained its pledge to cap long-term rates around zero.
BOJ Governor Haruhiko Kuroda made clear that the bank would not follow the Fed's footsteps any time soon, saying Japan still needed massive monetary support with inflation distant from the bank's 2 percent target and risks to growth skewed to the downside. The Reuters calculation for the aggregate US dollar position is derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars.