Speculators pared back net short US dollar bets, pushing them to their lowest level since mid-November, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday. The value of the net short dollar positions, derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars, was $2.18 billion in the week ended December 19.
That was lower than the previous week's net short position of $7.81 billion. Dollar shorts fell after rising four straight weeks. Speculators have been short the dollar for 23 straight weeks.
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 valued at $3.287 billion this week, from $9.803 billion previously.
The dollar index was on track to post its worst yearly performance in 14 years.
The dollar has mostly struggled for the majority of the year, after rallying following the US presidential elections. The greenback has declined in each of the first three quarters.
The reduction in dollar shorts this week was driven by the fall in euro longs and the sudden deterioration of sentiment on the Australian dollar.
Euro net longs fell 113,889 to 86,224 contracts.
Shaun Osborne, chief currency strategist at Scotiabank, said the slide in net euro longs was mainly fuelled by an increase in gross shorts this week, essentially "investors essentially adding more risk."
Osborne said this was slightly surprising for the time of the year.
Aussie dollar net short contracts totalled 12,660, compared with net longs the previous week of 40,720 contracts. This was the largest positioning shift against the Australian dollar since 2007.
"Aussie positioning is a little perplexing; the modest net long in the market that has persisted since mid-year has turned into a large and relatively significant net short," said Osborne.
"There is little obvious fundamental news to have driven such a turn in sentiment over the past week, in our opinion."
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