Traders Boost Bets Against Dollar to Highest in Almost a Decade
Crumpled U.S. dollar notes are arranged for a photograph. (Photographer: Alastair Miller/Bloomberg News)

Traders Boost Bets Against Dollar to Highest in Almost a Decade

Speculative traders are ending the year doubling down on their bets against the dollar.

Net short non-commercial positions in futures linked to the ICE U.S. Dollar Index have surged to the most since March 2011, according to the latest Commodity Futures Trading Commission data. The gauge of the U.S. currency has fallen over 6% this year as investors turned against the greenback amid unprecedented monetary easing from the Federal Reserve and a move away from haven assets.

Traders Boost Bets Against Dollar to Highest in Almost a Decade

“Hedge funds are spoilt for choice when looking for reasons to be short the dollar,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “We have a Fed that is committed to a paradigm shift in its policy that materially lowers the risk of policy normalization, and a rapidly widening twin deficit makes it easier for short dollar bets.”

A combination of negative U.S. real yields, extended valuations across American assets and a current account deficit that requires dollar depreciation to finance will likely weigh on the currency into next year, strategists at Goldman Sachs Asset Management wrote in a recent note.

Traders Boost Bets Against Dollar to Highest in Almost a Decade

The Bloomberg Dollar Spot Index was down 0.3% as of 6:55 a.m. in New York on Tuesday. Ten-year Treasury yields rose two basis points to 0.94%.

“We see depreciation in the dollar continuing into 2021,” the Goldman team said. “Liquidity dynamics and virus news flow may influence the timing of dollar weakness, but not necessarily the medium-term downtrend.”

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.