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Speculators trim USD bets; cryptocurrencies slump

New York

SPECULATORS' net long bets on the US dollar fell to a five-week low in the latest week, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.

The value of the net long dollar position was US$20.60 billion in the week ended Sept 4, down from US$23.34 billion the previous week. Speculators were net long dollars for a 12th straight week, after being short for 48 consecutive weeks.

To be long a currency means traders believe it will rise in value, while being short points to a bearish bias.

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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 rubel, the US dollar posted a net long position valued at US$22.14 billion, compared with a net long position valued at US$24.69 billion a week earlier.

The modest pullback in bullish bets on the US dollar comes after speculators had boosted net long bets on the greenback to the highest in more than 11/2 years, in late August.

"There is an awareness that it is a very crowded trade," said Karl Schamotta, director of global markets strategy at Cambridge Global Payments. "There are some major uncertainties about just how far US growth outperformance and monetary divergence will go."

Investors are also cognisant of the approaching US midterm elections on Nov 6, when Democrats need to pick up 23 seats in the House of Representatives and two seats in the Senate to gain majorities in Congress as they look to slam the brakes on President Donald Trump's agenda.

"You are seeing preparation for a gridlocked political system, which isn't necessarily terrible for the market, but it does raise the question whether additional stimulus can really be pushed into the pipe," said Mr Schamotta.

On Friday, the US dollar rose broadly as data showed US job growth surged in August, but investors remained jittery about a possible escalation of the US-Chinese trade conflict as Mr Trump threatened China with more tariffs.

Meanwhile, speculators trimmed their net short position on bitcoin Cboe future contracts to 1,368 contracts, down from a net short position of 1,472 contracts, the data showed.

Major cryptocurrencies, including bitcoin, fell in value this week, following a Business Insider report that Goldman Sachs Group Inc is ditching plans to open a desk for trading cryptocurrencies as the regulatory framework for crypto remains unclear.

The days of explosive growth in the blockchain industry have likely come and gone now the average person is aware of its existence, according to Vitalik Buterin, co-founder of Ethereum.

"The blockchain space is getting to the point where there's a ceiling in sight," he told Bloomberg at an Ethereum and blockchain conference in Hong Kong. "If you talk to the average educated person at this point, they probably have heard of blockchain at least once. There isn't an opportunity for yet another 1,000-times growth in anything in the space anymore."

Ether, the cryptocurrency that fuels the Ethereum blockchain, has slumped more than 80 per cent from a January high this year and now trades at less than US$250, according to Bitstamp exchange pricing compiled by Bloomberg. BLOOMBERG, REUTERS