There’s been no lack of love for the U.S. dollar in the markets lately.
At the end of May, the dollar index strengthened to its highest levels since 2010.
Meanwhile, last week, bullish bets on the dollar hit an all-time high. And Wall Street says we are on the verge of a secular bull market in the dollar.
That trade is getting hit pretty hard today. The dollar index is trading down 1.0%, and many currencies that have been weakening against the dollar – like the South African rand, the Brazilian real, and the Australian dollar are rallying.
The chart below shows the sharp sell-off in the dollar index.
One big area of weakness for the dollar today is against the Japanese yen, another favourite trade among global investors in recent quarters. The dollar is down 1.3% against the yen as investors close their short-yen positions.
Buying Japanese stocks and selling the yen against the dollar has become one of the most consensus trades in the world, but in the past two weeks or so, it’s run into some serious trouble.
The dollar has fallen from a high of ¥103.72 against the yen to current levels around ¥99.17 today.
Meanwhile, the Nikkei has lost a brutal 17% since May 22 – and futures are still taking a bath in after-hours trading today.
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