Dollar Set for Rally as Traders Turn Bullish for First Time Since '05

The number of net longs (the difference between the number of long position and the number of short positions) on the dollar rose to 21,315 in late April according to the Commodity Futures Trading Commission. The positive number breaks a 123-week streak of net shorts, marking the first time since 2005 traders have been bullish on the currency. Bloomberg:

The measures are making long-suffering proponents of the dollar optimistic that this time the currency’s rally may hold, especially if the Federal Reserve’s Open Market Committee refrains from additional interest-rate cuts. The Dollar Index traded on ICE Futures in New York, which tracks the currency against six trading partners, is up 3.7 per cent from an all-time low of 70.698 set on March 17.

“There is kind of a sea change taking place at the moment,” said Mitul Kotecha, head of foreign-exchange research in London at investment bank Calyon, whose forecasts on the euro-dollar exchange rate in the first quarter were more accurate than those of the two biggest currency traders. “It’s probably the early sign of perhaps a more sustained turnaround.”

A dollar rally would bring needed relief to U.S. consumers by reducing import and commodity prices. If US consumers are spending less on gas and other imports, they can spend more on other things, which may help aid an economic recovery.

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