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It looks like traders are starting to question whether the US dollar rout may have run its course

Photo: Jeff Krause/ Flickr creative commons.

It looks like more than a few traders are starting to question whether the US dollar selloff may have run its course.

According data from the US Commodity Futures Trading Commission (CFTC), traders bought the greenback against all major currencies, aside from the Swiss franc, last week, trimming their net US dollar short positions by $US1.4 billion to $US6.5 billion.

This chart from ANZ shows net US dollar positioning against major currency pairs over the past three years.

Source: ANZ

Net speculative positioning, defined by ANZ as non-commercial positions reported by the CFTC, is simply the sum of long and short options and futures positions in a particular asset, in this case the US dollar. While only positioning reported by the CFTC, the data can be used to extrapolate broader views held by currency traders.

“All major currencies except the CHF saw net selling, led by the GBP and JPY,” said Irene Cheung and Rini Sen, strategists at ANZ Bank.

“Commodity currencies were also on the back foot during the week with net selling of $US500 million, led by the NZD with $US300 million.

“Long AUD positions were reduced marginally.”

The CFTC data captures changes in investor positioning as at the close of business each Tuesday.

While the price action in the US dollar since the cutoff date has been anything but convincing, the reduction in short positioning indicates that some traders are becoming wary of chasing further declines given the dollar has already fallen by a substantial amount this year with much of the bad news already priced in.

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