Speculators raise their long dollar bets

SPECULATORS increased their net long US dollar positions in the latest week, according to calculations by Reuters and US Commodity Futures Trading Commission data released on Friday.

The value of the net long dollar position jumped to US$8.50 billion in the week ended Aug 24, compared with a net long of US$1.06 billion the previous week. That is the largest long position since March 2020.

In a wider measure of dollar positioning that includes net contracts on the New Zealand dollar, Mexican peso, Brazilian real and Russian rouble, the US dollar posted a net long position of US$8.42 billion, compared with a net long of US$0.80 billion a week earlier.

Meanwhile, a noticeable drop in the dollar, minutes before the release of the text of Federal Reserve chairman Jerome Powell's speech to the annual Jackson Hole economic conference left some market watchers puzzled.

Minutes before the text of Mr Powell's remarks was released, the dollar index, which measures the US currency's strength against six peers, fell 0.2 per cent.

While the drop was modest, it raised eyebrows coming so close to the hotly anticipated speech from the Fed chair.

"I've been looking into what happened, and I still can't tell what triggered that dollar slide," said Cambridge Global Payments strategist Karl Schamotta, who called the move "odd".

Friday's speech was eagerly awaited by foreign exchange market participants looking for clues to the Fed's next monetary policy moves, which typically have big implications for the US dollar and other currencies, but also fixed income and equities.

The greenback extended its declines after the initial drop, with the dollar index down 0.40 per cent in late afternoon trading.

Meanwhile, the dollar index, which measures the US currency's performance against a basket of six major currencies, fell 0.39 per cent to 92.6760.

The euro rose 0.37 per cent to US$1.1794, while the yen fell 0.24 per cent at US$109.8200.

After minutes of the Fed's policy-setting meeting in July were released last week, the dollar advanced because most market participants anticipated tapering to begin this year.

Mr Powell was clear to detach tapering from "the rate liftoff", or raising interest rates, said David Petrosinelli, senior trader at Insperex in New York.

The New Zealand dollar dipped slightly after Prime Minister Jacinda Ardern announced that a lockdown against Covid-19 in Auckland is likely to remain in place for another two weeks.

The Canadian dollar rose 0.56 per cent to 1.2612 versus the US dollar. REUTERS