FX traders are yanking their bullish US dollar bets

Photo by David Rogers/Getty Images

Weighed down by reduced market expectation that the US Federal Reserve will raise interest rates this year, currency traders reduced their bullish US dollar bets to the lowest level in more than a year last week, according to data released by the US Commodity Futures Trading Commission (CFTC).

The chart below, supplied by ANZ, shows net US dollar long positioning against a basket of currencies including the euro, Japanese yen, British pound, Swiss franc along with the Canadian, Australian and New Zealand dollars.

While positioning is still long, something that indicates traders on balance expect the US dollar to strengthen in the period ahead, the total outstanding level of bullish bets fell by $4.6 billion to just $11 billion last week, the lowest level seen since July 2014.

The CFTC data was at the close of trade on Tuesday October 20, just two days before ECB president Mario Draghi gave a strong indication that the bank was likely to loosen monetary policy further at its December meeting, something that saw the euro weaken sharply against the US dollar in response.

In what may be deemed to be an unfortunate case of timing, the reduced level of US dollar long bets coincided with the US dollar index staging its largest two-day percentage increase seen in five months on Thursday and Friday last week.

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