Net long dollar bets fall despite hawkish Fed comments

US dollar long bets fell to $7.1 billion from $9.10 billion against the major currencies during the previous week, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to September 13. Economic data didn’t improve during the past week. Nevertheless Federal Reserve officials’ hawkish comments about a rate hike soon as labor market continues strengthening with economy near full employment provided a lift to dollar. Boston Fed President Eric Rosengren said that a reasonable case can be made for raising interest rates soon. While Federal Reserve Governor Lael Brainard said on Monday that despite the strength in the US labor market the lack of inflationary pressure “makes the case to tighten policy pre-emptively less compelling”, hawkish stance of policy makers advocating for a rate hike soon added to increased uncertainty about Fed’s decision at September policy meeting. Investors reduced bullish bet on dollar despite hawkish Federal Reserve comments. As is evident from the Sentiment table, sentiment deteriorated for Canadian dollar, Australian dollar and Swiss franc. And the euro and British Pound are still the two major currencies held net short against the US dollar.

The bearish euro sentiment improved considerably helped also by the European Central Bank decision to keep the monetary policy unchanged. The net short position narrowed by $1.6bn to $11.4bn. Investors cut both the gross longs and shorts by 5541 and 16696 contracts respectively. The British Pound sentiment also improved with higher than expected inflation in August adding to recent positive data. Pound net shorts fell by $0.7 billion to $6.8bn. The net short position in British Pound narrowed as investors cut both the gross longs and the shorts. The bullish Japanese yen sentiment intensified with the net long position in Japanese yen rising by $0.2bn to $6.9bn. Investors built the gross longs and covered the shorts by 2172 and 185 contracts respectively.

The deterioration of the Canadian dollar sentiment continued with the net longs falling by $0.3bn to $1.3 billion. Investors built both the gross longs and gross shorts. The bullish sentiment softened also for the Australian dollar with net longs declining by $271 million to $2.7 billion. Investors cut both the gross longs and gross shorts. The sentiment deteriorated marginally for the Swiss franc as the net longs fell by $15 million to $172 million. Investors cut both the gross longs and shorts.