USD Net Longs Rise to Two Month High

The report of the Commodity Futures Trading Commission (CFTC) covering data up to August 4 revealed the value of US dollar net long position rose to two-month high of $32.78 billion from $29.8 billion in the previous week. Fed’s policy statement after July 28-29 meeting said US economy and job market continue to strengthen, noting solid job gains in recent months. Fed officials said they felt the economy had overcome a first-quarter slowdown and was expanding moderately despite the weakness in the energy sector and global growth slowdown. The policymakers indicated they need to see some more improvement in the labor market, underlining the expectations the recent gains will continue. The statement reinforced the bullish sentiment for dollar, providing additional support for a rate hike expectations in September and contributing to increased bullish bets on dollar. As is evident from the Sentiment table, the sentiment deteriorated for all major currencies except for the British Pound and Australian dollar. All currencies are held net short against the dollar after deterioration in Swiss franc sentiment resulted in net short position in the only currency that was held long against the US dollar until last week.

The euro sentiment has turned negative after previous week’s improvement. The net short bets in euro widened $1.0bn to $15.4bn, with euro’s share falling to 47% of long US dollar position. The euro net short position fell as investors increased both gross longs and gross shorts.

The pace of Japanese yen sentiment deterioration accelerated with net short position widening $1.58bn to $8.0bn as investors increased both gross shorts and gross longs. The Japanese yen still has the second highest short bets against US dollar, increasing its share of aggregate US dollar long position to 24.5%. The British pound sentiment continued to improve with net short bets narrowing $0.32bn to $0.64bn with investors increasing gross longs and covering shorts.

The sentiment toward the Canadian dollar continued to deteriorate at a slower pace with net short position widening $0.53bn to $4.8bn. Investors cut gross longs and increased gross short positions. The Australian dollar sentiment improved ahead of Reserve Bank of Australia interest rate decision on August 4, when the central bank left the interest rate unchanged. Australian dollar net short bets narrowed by $72 million to $3.6bn as investors increased gross longs and gross shorts. Continued deterioration in Swiss franc sentiment which resulted in $0.2bn bet against the Swiss currency has yielded a net short position of $0.19bn. Investors increased both gross longs and gross shorts.