Tuesday, 13 September 2016 17:47 Written by

Investors build long dollar bets on bullish Fed talk 13-09-2016 by IFC Markets


US dollar bullish bets rose to $9.09 billion from 5.29 billion against the major currencies during the previous week, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to September 6. After cutting bullish bets on dollar for eight weeks investors seem to have taken notice of the change in central bank policy makers’ stance following Fed Chair Yellen’s speech at Jackson Hole symposium. The data actually didn’t improve last week. The nonfarm payrolls increased by just 151 thousand, after rising by more than 200 thousand last couple of months. While it is big enough for keeping the unemployment stable as new job seekers enter the labor force due to just population growth, it is lower than the three month average at 210 thousand. Analysts noted the Federal Reserve needed to see inflation improving to justify monetary tightening. With growth in hourly earnings slowing it is not likely consumer prices will start rising. The Nonmanufacturing Index of the Institute for Supply Management fell to 51.4 in August from 55.5 in July, the slowest pace of growth since 2010. The slipping of the Fed’s labor-market conditions index to minus 0.7 in August after a positive reading of 1.3 in July, the seventh negative reading in the past eight months, was another weak report. However, investors increased bullish bet on dollar following hawkish Federal Reserve comments. As is evident from the Sentiment table, sentiment deteriorated for all currencies except for British Pound. And the euro and British Pound remain the two major currencies held net short against the US dollar.


The bearish euro sentiment intensified ahead of European Central Bank policy meeting Thursday. The pace of increase in net short position tripled as the net short widened by $1.6 bn to $13.0 bn. Euro accounts now for more than 63% of total net short against the dollar as investors cut both the gross longs and shorts by 10937 and 232 contracts respectively. The British Pound sentiment was essentially unchanged as UK economic data show economy fairs better than expected after Brexit. Pound net short fell by $11mln. The net short position in British Pound narrowed as investors cut both the gross longs and the shorts. The bullish Japanese yen sentiment softened considerably with the net long position in Japanese yen falling by $1.0bn to $6.6bn. Investors cut the gross longs and built the shorts by 1602 and 1570 contracts respectively.


The bullish sentiment for the Canadian dollar deteriorated slightly with the net longs falling by $83 million to $1.6 billion. Investors cut both the gross longs and gross shorts. The bullish sentiment continued to deteriorate for the Australian dollar with net longs declining by $205 million to 2.9 billion. Investors cut both the gross longs and gross shorts. The sentiment deteriorated significantly for the Swiss franc as the net longs fell by $0.8bn to $187 million. Investors cut both the gross longs and shorts.




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