Speculators boosted their net long bets on the US dollar in the latest week to a five-week high, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday. The value of the net long dollar position was $15.29 billion in the week ended Sept. 17. The net long dollar position had stood at $13.33 billion last week.
To be long a currency means traders believe it will rise in value, while being short points to a bearish bias. US dollar positioning was derived from net contracts of International Monetary Market speculators in the Japanese 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 greenback posted a net long position of $15.40 billion in the week ended Sept. 17, compared with $12.58 billion the previous week. On Friday, the US dollar rose against a basket of currencies and it posted its first weekly increase in three, helped by hopes that the Federal Reserve would not lower rates aggressively.
Against a favorable economic backdrop, the Fed lowered key lending rates by a quarter point on Wednesday, but signaled a higher bar to further reductions in borrowing costs.
Interest rates futures implied traders saw a 63% chance of another rate cut by year-end, compared with 69% late on Thursday, CME Group's FedWatch program showed. While interest rate cuts typically weaken the US dollar, because investors often swap dollars for foreign currencies to take advantage of better interest rates in other countries, the recent Fed rate cuts have done little to hurt the greenback. The strength of the US economy relative to the rest of the world and low interest rates around the globe have led investors to favor the US dollar.