Investors reduced bullish bets on US dollar from $24.0 billion in the previous week to $21.47 billion according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to September 1. The continued concern that China’s slowdown is weighing on global economy growth drove investment sentiment last week, resulting in increased volatility and speculation that the Federal Reserve will not hike the interest rate in September. The speech of Federal Reserve Vice Chairman Stanley Fischer at central bankers’ annual conference in Jackson Hole, Wyoming indicated Federal Reserve considered the possibility of raising rates at its September 16-17 policy meeting as inflation continued rebounding. However given the continuing fall in commodity prices and indications of slowing growth of China’s economy market participants grew increasingly more skeptical of the likelihood of a rate hike, which translated into lowest bullish bets on dollar since July 2014. At the same time increased demand for euro and yen as investors withdrew from falling emerging markets contributed to reduction in net short bets in euro and yen. As is evident from the Sentiment table, the sentiment improved for all major currencies except for the British pound and euro, and no currency is held net long against the dollar.
The euro sentiment remained practically unchanged as the net short bets stayed at $9.5bn level after narrowing for just $81 million. Euro’s share increased noticeably to about 44% of long US dollar position. The euro net short position fell as investors cut both gross longs and covered shorts, indicating uncertainty in expectations for changes. The Japanese yen sentiment continued to improve at a slower pace as investors covered shorts and increased gross longs. The yen net short position narrowed $2.47bn to just $1.6bn, falling by more than 50%. The positive dynamic of the previous week reversed for the British Pound as investors cut gross longs in British Pound and increased gross shorts. The British Pound is now held net short $1.07bn after a weekly increase of $1.39bn in short bets on the Pound.
The Canadian dollar sentiment continued to improve for the third week with the net short position narrowing $0.3bn to $4.1bn. Investors cut gross longs as they covered gross shorts. The Australian dollar sentiment improved with net short bets narrowing by $0.6bn to $3.9bn as investors cut both gross longs and gross shorts. Swiss franc sentiment improved with the net short position narrowing $0.56bn to $1.1bn. Investors increased gross longs while they covered shorts .