December 7, 2023

US Dollar Net Longs Increase And Euro Shorts Biggest Since 2020

The latest week saw the net long positioning of speculators on the US dollar rise, while there was also an increase in the net shorts on the euro.

This data was released on Friday by the US Commodity and Futures Trading Commission (CFTC).

Net long dollar positions

According to the CFTC data, in the week ending on August 16th, there was a rise in the net long dollar positions from $12.9 billion in the last week to $13.37 billion.

This is the first time that there has been an increase in net long dollar positions in four weeks. The data further showed that there was the largest jump in euro net shorts since February 2020 to 42,784 contracts.

In late July, the policy meeting of the US Federal Reserve had resulted in the greenback recording a two-way flow, even though the interest rate was increased by 75 basis points in the said meeting.

The dollar had dropped to a three-week low against the Japanese yen on July 27th, as the market considered the comments of the Fed chairman, Jerome Powell, to be less hawkish after the meeting.

Fed’s impact

Powell had stated that considering the strength of employment, he did not think that the economy was in recession. He also said that a recession was not necessary for taming super-high inflation.

However, the minutes of the July meeting released this week indicated that the Fed has no intention of backing down from their aggressive tightening, but the pace of tightening depends on the data.

The minutes of the meeting were supportive of the dollar. Since the July meeting, there has been a 1.8% gain in the US dollar index. But, the greenback has eased slightly against the Japanese yen.

Market analysts said that even though there had been indications of a potential divide in the Federal Open Market Committee (FOMC) about much the rates should be increased, a recession is still way off.

The economy has also shown some cracks, but the policymakers remain resolved to control inflation as much as possible.

This has helped Treasury yields in recovering from the lows they had hit at the beginning of the month and has given the US dollar additional support, which has already reaped the benefits of safety support.

Other currencies

The single currency in Europe has been moving downwards in the euro zone, as there is an energy crisis happening due to the Russia and Ukraine conflict and the risks of recession are high.

Since the start of the year, there has been a 12% drop in the euro against the US dollar. It was the last trading at $1.0039, which is a drop of 0.5%.

In the crypto market, bitcoin net shorts also declined from 230 contracts a week ago to just 93 contracts. This week’s number was the smallest seen since January.

Speculators had remained long on Bitcoin from late April to the beginning of July. The leading crypto dropped to a three-week low on Friday to $21,156.

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