Dollar short bets fall as US inflation ticks up

Economic data were positive during the week. US wholesale prices rose 0.4% in September contributing to an annual growth rate of 2.6%, the fastest pace since 2012. The home builders index for October rose to five month high. Import prices rose 0.7% in September, the biggest gain in more than a year. Industrial production rose 0.3% on month in October after 0.7% decline the previous month. Both the inflation and retail sales rose in September though less than expected. And Federal Reserve chair Yellen said “ongoing strength of the economy would warrant gradual increases” in short term interest rates. Investors reduced net short dollar position as improving data and comments from Federal Reserve policy makers boosted the chances of a third rate hike this year in December. As is evident from the Sentiment table, sentiment deteriorated for all major currencies against the dollar. And the euro, Canadian and Australian dollars together with British Pound remain the four major currencies held net long against the US dollar.