NEW YORK: Speculators' net long bets on the US dollar rose in the latest week to the largest position since December 2016, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.
The value of the net long dollar position was $29.53 billion in the week ended Nov. 27, up from $28.49 billion the previous week. Speculators were net long on dollars for the 24th straight week, after being short for twice as long. To be long on 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 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 long position valued at $30.11 billion, compared with a net long position valued at $28.98 billion a week earlier. The dollar rose on Friday as investors prepared for the outcome of trade talks between the United States and China at the G20 meeting on Saturday, which investors expect will increase volatility across markets.
"If we see a sign that leaders are singing 'Kumbaya,' then we are going to have a rotation into emerging markets, the Chinese yuan, commodity-linked currencies, particularly the Aussie, that would begin eroding the US dollar advantage, particularly in the fixed income space," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto. US President Donald Trump said on Friday there were some good signs ahead of the meeting with Chinese President Xi Jinping.
The dollar index, which measures the greenback against a basket of six major currencies, was up 0.5 per cent. For the week, the index was up 0.3 per cent, its second straight week of gains, and is close to the highest it has been since June 2017. The week's gains came despite a sharp slide on Wednesday after Federal Reserve Chairman Jerome Powell said US interest rates were just below neutral, a remark many investors took as a tip that the rate hike cycle was nearing its end.
"This week's comments from Powell, in particular, certainly point to a more cautious outlook, more skepticism on the path of rate hikes through 2019," said Schamotta. "What it all adds up to is that likely next week you are going to see a drop in that long position and sort of a beginning of a rotation into other global assets," he said.
Meanwhile, speculators cut their net short position on bitcoin Cboe future contracts to a record low of 979 contracts, down from a net short position of 1,199 contracts, the data showed. Bitcoin fell as much as 7 per cent on Friday, heading toward a recent one-year low in a broad-based sell-off in cryptocurrencies.
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