Betting against the dollar is growing in popularity after the Federal Reserve upended markets by signaling the end of its monetary tightening campaign.
Non-commercial traders — a group that includes hedge funds, asset managers and other speculative market players — boosted their bearish bets on the greenback in the week ended Tuesday, according to CFTC data compiled by Bloomberg. More than 39,000 contracts are now tied to expectations the US currency will fall, up more than 10,000 from a week ago when the Fed was preparing to meet, the data show.
The currency has suffered a pronounced slump in the wake of that confab, when the Fed released updated economic projections forecasting additional monetary easing next year. That sent the Bloomberg Dollar Spot Index tumbling to the lowest since July and down more than 2% year to date, on track for the worst annual performance since 2020. Indeed, while there are now more contracts betting on dollar weakness, the dollar value of those contracts has actually slipped to $5.5 billion, slightly lower than last week.
The dollar extended its drop on Friday after the Fed’s preferred gauge of underlying inflation showed muted price gains, affirming the central bank’s pivot toward interest-rate cuts next year.
The Swiss franc rose to the strongest level against the US currency since 2015, while the euro and Norwegian krone rose to their highest levels since August. Demand for options that benefit if the dollar appreciates fell to the lowest since June versus those that pay out if the greenback weakens, according to an index of one-year risk reversals, pointing to more weakness in the coming year.
Leveraged funds adjusted net positions as follows:
Reduced net JPY short by 3,563 contracts to 62,251
Increased net EUR short by 15,736 contracts to 25,828
Raised net GBP long by 15,854 contracts to 29,949
AUD position switches to net long 2,365 from net short 1,626
NZD position switches to net long 2,461 from net short 7,300
Raised net CAD short by 14,264 contracts to 51,971
CHF position switches to net long 33 from net short 3,244
Raised net MXN long by 1,775 contracts to 25,352
Asset managers changed net positions as follows:
JPY position switches to net long 13,704 from net short 3,071
Decreased net EUR long by 1,454 contracts to 379,612
Raised net GBP short by 9,499 contracts to 42,979
Cut net AUD short by 9,122 contracts to 64,891
Trimmed net NZD short by 2,723 contracts to 9,356
Lowered net CAD short by 21,885 contracts to 27,295
Reduced net CHF short by 3,571 contracts to 3,686
Increased net MXN long by 5,422 contracts to 139,357