Positions betting on a dollar rise are being predicted

According to data compiled by Bloomberg from the Commodity Futures Trading Commission (CFTC), the net dollar positioning indicator, which shows leveraged funds' long positions in the US Dollar against eight currencies, rose to its highest level since February 2022 as of November 21.

This indicator, after bottoming out at 72,000 net sell contracts in March, rose slightly above the peak seen in April with 103,042 net long positions.

The increase in long dollar positions coincides with a period in which the Bloomberg Dollar Index is heading toward its worst month since last November. The index experienced its worst week since July at the beginning of this month and wiped out its year-to-date gains as investors increased positions betting that the Fed's interest rate hikes could be coming to an end and brought forward expectations for central bank rate cuts.

On Monday, the Bloomberg Dollar Index fell for the third consecutive session as Treasury bonds rose following strong demand for the 5-year bond auction. Dominic Bunning, Head of European FX Research at HSBC, said, "We often think of US dollar performance in the context of interest rate differentials and its interaction with risk appetite."

On this front, the dollar is caught between two effects. The much stronger risk appetite, also driven by the rise in global stock markets, has caused the dollar to weaken. However, the dollar's overall yield advantage has not softened, and this could ultimately act as a speed limit on further dollar weakness," he said.

News Source: 12punto