At the end of May, amid a big sell-off in the U.S. Treasury market driven by fears that the Federal Reserve will taper back monetary stimulus sooner than expected, the U.S. dollar index strengthened to its highest levels in nearly three years.
The comeback of the U.S. dollar is one of the key themes driving global markets right now. Currencies across the emerging world have declined significantly in value (relative to the dollar) over the past month, and strategists believe the dollar is on the cusp of a secular bull market after a decade of decline.
The latest data from the CFTC’s Commitment of Traders report, then, should be no surprise: last week, bullish bets on the U.S. dollar reached an all-time high.
“In just four consecutive weeks of USD buying, speculators have bought $20.6bn, doubling their net long USD positioning,” says BofA Merrill Lynch FX strategist Ankur Singh. “During the last peaks in May 2012, the market continued buying USD for a further three weeks before reversing the trend.”
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