US Dollar Bullish Bets Rise After Fed Decision

Bullish bets on US dollar rose from $30.9 billion to $32.8 billion against the major currencies in the previous week, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to December 22. After the Federal Reserve started the monetary policy normalization by increasing the interest rates by 25 basis points on December 16, policy makers indicated the economic activity in US has been expanding at a moderate pace, household spending and business fixed investment have been increasing at solid rates in recent months, labor markets have improved further but net exports have been soft. Economic reports during the week provided confirmation of negative impact of weak foreign demand and falling oil prices on US economy as Philadelphia and Kansas City Fed manufacturing reports showed manufacturing activity in December contracted in both regions after expansion in November with new orders falling. Exports are falling as US dollar strengthens with monetary tightening in US while foreign central banks maintain expansionary monetary policy stance. As is evident from the Sentiment table, the sentiment deteriorated for all currencies except for Swiss franc, which is the only major currency still held net long against the US dollar.

The euro sentiment deteriorated after improving for two weeks with net short bets in euro widening by $187 million to $22.0bn. Euro’s share edged lower to about 67% of long US dollar position. The euro net short position rose as investors reduced the long bets by 786 contracts and increased short contracts by 300. Japanese yen sentiment deteriorated with net short position in yen increasing by $0.4bn to $3.1bn. Investors added 4163 contracts to gross shorts while they increased the gross longs by 376. The sentiment deteriorated also for the British Pound with the net short position widening by $0.8bn to $2.4bn. Investors increased both the gross shorts and the gross longs.

The sentiment for Canadian dollar continued to deteriorate with the net short position widening by $0.3bn to $4.0bn. The Canadian dollar is still the second largest held net short after euro. Investors built further the gross shorts and cut gross longs. The Australian dollar sentiment deteriorated with net short bets narrowing by $0.7bn to $1.5bn. Investors cut both the gross shorts and gross longs. The sentiment towards the Swiss franc continued to improve with the net long position increasing by $102 million to $348 million. Investors cut both the gross longs and gross shorts.