Monday, 25 July 2016 14:36 Written by

US dollar bullish bets rise to highest since early June by IFC Markets


Investors increased US dollar net longs to $10.39 billion from $8.0 billion against the major currencies during the previous week, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to July 19. Positive economic reports after the surprisingly strong jobs report for June supported the US dollar, with bullish bets hitting highest since early June. A 0.6% on month rise in retail sales in June after increasing 0.2% in May underscored strong consumer spending, alleviating concerns spurred by disappointing May jobs report that economic recovery might have slowed. The industrial and manufacturing production also rose in June. Rise in building permits and housing starts in June attest to strength in housing market, an important component in consumer spending. The only negative development was the fall in consumer sentiment in July which declined to 83.5 from 93.5 in June, reflecting concerns about future employment prospects. The positive economic reports underpinned expectations for a possible rate hike this year, with investors building net longs on dollar for third straight week. As is evident from the Sentiment table, sentiment deteriorated for euro, British Pound, Swiss franc and Japanese yen. And Australian dollar, Swiss franc, Canadian dollar and Japanese yen remained the four major currency held net long against the US dollar.


The bearish euro sentiment deteriorated as the net short position in euro widened at roughly the previous week’s pace rising by $1.6bn to $13.7bn. The net short position in euro increased as investors cut the gross longs by 3943 contracts and built the shorts by 16174 contracts respectively. The British Pound sentiment deteriorated despite the Bank of England interest rate decision on July 14 to leave the interest rate unchanged at 0.5%, anticipating loosening of monetary policy at August meeting. The pace of increase in net short bets was almost identical to previous week’s change as the net short rose by $1.1bn to $6.0 billion. The net short position in British Pound widened as the gross longs were cut by 12040 contracts and the shorts were increased by 2279. The bullish Japanese yen sentiment continued to weaken with the net long position in Japanese yen falling by $1.0bn to $4.6bn. Investors here too cut the gross longs and increased the shorts by 5500 and 2692 contracts respectively.


The sentiment continued to improve for the Canadian dollar with the net longs rising by $377 million to $1.69 billion. Investors increased the gross longs and covered the shorts. The bullish sentiment strengthened considerably for the Australian dollar with net longs more than doubling to $2.5 billion from $1.2bn. Investors built the gross longs and cut the shorts. The sentiment continued to deteriorate for the Swiss franc with the net long position narrowing at previous week’s pace falling by $255 million to $0.59 billion. Investors reduced the gross longs and built the gross shorts.



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