Funds' short dollar position smallest in three months: McGeever
By Jamie McGeever
ORLANDO, Florida (Reuters) -Hedge funds' bearish view on the dollar is evaporating fast and at the current pace of buying they will be outright bullish by the end of the month.
What's more, recent history suggests that when funds go long dollars, they tend to stay long for a while. 'Longer for longer', if you like.
The latest Commodity Futures Trading Commission (CFTC) data shows that funds cut their net short dollar position to $7.17 billion, the smallest bet against the dollar since mid-June and a third of what it was six weeks ago.
It has halved in the last two weeks, and at the current pace the speculative community will be net long of dollars by the end of the month. This shift has coincided with the dollar's rise to a six-month high against a basket of currencies.
A short position is essentially a wager an asset's price will fall, and a long position is a bet it will rise. Hedge funds often take directional bets on currencies, hoping to get on the right side of long-term trends.
This is broadly reflected in CFTC positioning cycles.
From May 2013 — when former Fed chief Ben Bernanke uttered his famous 'taper tantrum' remark — funds went net long dollars for an almost uninterrupted four-year stretch through June 2017, a bullish bet that peaked at a record $51 billion in late 2014.
That was followed by a year being net short dollars, nearly two years of being net long, before swinging back to being net long for over a year. Funds have been net short of dollars since November last year.
This suggests that although the dollar's short-covering rally may not have much juice left in it, the greenback could find a solid source of long-term demand once the speculative community decides to turn
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