Investors cut net long dollar bets ahead of Jackson Hole symposium

US dollar bullish bets fall to $6.35 billion from $9.80 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 August 23. Economic data released during the week were mixed which didn’t contribute to dollar’s strength as the prospect of interest rate hikes remained uncertain. The Federal Open Market Committee July 26-27 meeting minutes showed two Fed officials argued for a rate hike but many policy makers wanted to wait for additional information. With recent data indicating no rise in inflation and weak wage growth, investors deemed the Federal Reserve will likely not hike rates at September meeting: Fed fund futures market data indicated market participants priced in an 18% chance of a September rate increase after the minutes were released, according to CME Group’s FedWatch tool. The jump in new home sales to 12.4% in July , the highest level in nearly eight years, instead of an expected 2% decline was a welcome positive news which provided support to Fed officials’ recent bullish comments about continued strength of US economy. But investors remained unconvinced the central bank will move to raise interest rates soon even as Fed Vice Chairman Stanley Fischer supported dollar bulls’ case last Sunday saying inflation is within “hailing distance” of the Fed’s 2% target. Investors cut dollar net long bets to seven week low ahead Fed Chair Janet Yellen’s speech at Jackson Hole on August 26. As is evident from the Sentiment table, sentiment deteriorated only for British Pound. And Swiss franc joined the Japanese yen, Australian dollar, and Canadian dollar as the fourth major currency held net long against the US dollar.

The bearish euro sentiment improved significantly as the pace of decline in net short position in euro almost quadrupled compared with the previous week: net short position fell by $2.2bn to $10.8bn. Euro remains the largest held net short against the dollar as investors increased the gross longs by 2314 contracts and covered the shorts by 13536 contracts respectively. The British Pound sentiment deteriorated as Pound net short rose at roughly half the previous week’s pace by $0.15bn to $7.8 billion. The net short position in British Pound increased as investors cut the gross longs by 40 contracts and the shorts were increased by 700. The bullish Japanese yen sentiment further intensified with the net long position in Japanese yen rising at roughly half the previous week’s pace by $0.5bn to $7.5bn. Investors increased the gross longs as they covered shorts by 2114 and 2196 contracts respectively.

The sentiment improved for the Canadian dollar with the net longs rising by $0.3bn to $1.29 billion. Investors increased the gross longs and cut gross shorts. The bullish sentiment remained strong for the Australian dollar with net longs rising by just $93 million to $3.2 billion. Investors continued to build the gross longs as they built also the shorts. The sentiment improved for the Swiss franc as a considerable weekly build of long bets of $0.4bn turned the $201 million net short position into a net long of $245 million. Investors increased the gross longs as they covered the shorts.