Traders wrong-footed by US dollar’s best start to year since 2011
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TRADERS who just boosted bearish US dollar bets might still be wishing it was 2023 after the greenback rang in the new year with its best start in more than a decade.
Non-commercial traders – a group that includes hedge funds, asset managers and other speculative market players – added to their short positions on the US dollar in the week ended Tuesday (Jan 2), according to CFTC data compiled by Bloomberg. Roughly 96,800 contracts worth almost US$10 billion are now tied to expectations that the US currency will fall, up more than 26,000 from the previous week and the most bearish since late August.
The snapshot of positioning was taken ahead of the Bloomberg Dollar Spot Index’s best start to the year since 2011, according to data compiled by Bloomberg that looked at performance during the first trading weeks. The greenback has surged about 0.9 per cent since markets opened the year on Tuesday, finding traction alongside Treasury yields as traders reel in bets, if only slightly, on future interest-rate cuts from the Federal Reserve.
The gauge ended the Friday session down less than 0.1 per cent, buffeted by both stronger-than-expected headline US jobs growth in December as well as a weak ISM services reading.
“What we’re seeing for 2024 so far is this pushback against rate cuts for the first half of the year, second half of the year as well, and the dollar is just a reflection of that,” Alan Ruskin, macro strategist at Deutsche Bank, said in a Bloomberg Television interview after the release of the payrolls data on Friday.
One specific group of speculative traders, leveraged funds, remained long the US dollar but also were caught out by the currency’s sudden rise last week. Leveraged funds cut bullish bets on the greenback to about 76,100 contracts, down about 18,200 from the prior week and the lowest amount in 10 weeks, the CFTC data showed.
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The CFTC report also showed leveraged funds added to a long-held and sizable net short position on the yen, while sharply reducing bearish bets on the euro. BLOOMBERG
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