USD bullish bets decline after rising for six weeks

Investors reduced bullish bets on US dollar from $44.06 billion in the previous week to $43.9 billion against the major currencies according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to December 1. Economic reports during the week indicated the US economy continued growing while economic indicators recorded negative impact of stronger dollar on manufacturing sector. Thus, manufacturing activity contracted in November with the Institute for Supply Management’s Manufacturing PMI falling to 48.6 in November from 50.1 in October, with continued decline in new export orders as the new export orders index reading recorded below 50 at 47.5, unchanged from October. This was the first contraction in manufacturing activity since November, 2012 and the sharpest since June, 2009. The decline in manufacturing activity followed the increase in durable goods orders in October. At the same time personal income in the United States increased 0.4% in October over the previous month and jobless claims fell, indicating further tightening of labor markets. Consumer confidence increased with the University of Michigan's final reading of consumer sentiment index in November recording at 91.3 compared to October’s reading of 90. As US economy continues recovering markets price in about 80% likelihood of interest rate hike in December. As is evident from the Sentiment table, the sentiment deteriorated for the euro and Swiss franc and all major currencies are held net short against the US dollar.

The euro sentiment continued to deteriorate on expectations of additional stimulus measures by the European Central Bank. The net short bets in euro increased at a slower pace widening by $0.9bn to $24.2bn. Euro’s share increased slightly to about 55% of long US dollar position. The euro net short position rose as investors increased short contracts by 9847 and increased the long bets by 2486 contracts. The bearish Japanese yen sentiment moderated with the net short position in yen narrowing by $0.2bn to $7.6bn. Investors cut the gross shorts by 1484 contracts while they increased the gross longs by 951. The sentiment started to improve also for the British Pound with the net short position narrowing $0.3bn to $2.6bn. The change in net position was driven by increase in gross longs as investors continued building also gross shorts.

The Canadian dollar sentiment stabilized with the net short position at $2.9bn level as it widened by $15 million. Investors cut both gross longs and gross shorts. The bearish sentiment toward the Australian dollar continued to improve with net short bets narrowing by $0.7bn to $3.4bn. Investors increased gross longs and cut the gross shorts. The bearish sentiment towards the Swiss franc continued to deteriorate at a slower pace with the net short position widening by $0.2bn to $3.0 bn as investors increased the gross shorts.