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Hedge funds trim bullish dollar bets as yen gains
The Bloomberg Dollar Spot Index is set for a weekly decline of about 0.7% after falling to its lowest level since May.
Hedge funds and other speculative investors have cut back their bullish exposure to the US dollar as shifting Federal Reserve rate expectations and a renewed yen rally weigh on the currency, according to a report by Bloomberg.
Bloomberg reported the Bloomberg Dollar Spot Index is heading for a weekly decline of about 0.7% and fell to its lowest level since May. Markets have scaled back expectations for a Federal Reserve rate increase at its 16 September meeting, with traders assigning roughly even odds to a hike.
Fed Governor Christopher Waller’s comments pointing to further progress on inflation added to pressure on the dollar, while concerns about the US fiscal outlook also hurt sentiment. Meanwhile, the yen is on course for its strongest week since July, gaining around 2.7% against the dollar.
CFTC data cited by Bloomberg showed hedge funds, asset managers and other speculative traders held about $27.6bn of net dollar longs in the week to 25 August, down from nearly $50bn at the end of July. The next major test for the dollar will come from US payrolls due Friday and inflation data due next week, which could shape whether the Fed has room to keep rates unchanged or pursue a September hike.