Dollar bullish bets fall to fresh lows

US dollar net long bets fell to $4.6 billion from $5.9 billion against the major currencies in the previous week after the Federal Reserve left the interest rates unchanged at conclusion of its March 15-16 meeting, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to March 29. Hawkish comments by several Fed officials, including Presidents of San Francisco, Atlanta and Chicago Feds John Williams, Dennis Lockhart and Charels Evans, were not enough to convince investors the Federal Reserve is leaning toward a rate hike in April after the unexpectedly dovish March 16 statement. Even the stronger than expected GDP final report that revised upward the fourth quarter growth to 1.4% from 1.0% of the second reading didn’t provide the necessary boost for US economic outlook that could support expectations of more tightening as the economy accelerates. Economic data were mixed, and markets deemed them not sufficient to indicate a higher likelihood of a rate hike in April. While a pick up of Services PMI to 51 in March from 49.7 in previous month indicated services sector resumed expansion after contracting in February, and new home sales rose in February after a decline in January with consumer confidence rising in March more than expected, personal income growth declined to 0.2% in March from not very impressive rise of 0.5% in previous month and personal spending remained stagnant at 0.1%. The 2.8% fall in durable goods orders in March added to concerns about manufacturing sector weakness, and lower capital goods orders indicate declining business investment. And the 2.0% rise in new homes sales in February came on the back of 7.1% fall in existing home sales. The mixed data indicate US economy is growing at moderate rate with little sign of acceleration that could prompt another rate hike by the Federal Reserve in its pursuit of normalization of interest rates, which led to weaker dollar and fall in dollar bullish bets. As is evident from the Sentiment table, sentiment improved for all major currencies except for the British Pound. And the Japanese yen, the Australian dollar and Swiss franc still remain the three major currencies held net long against the US dollar.

The bearish euro sentiment continued to moderate with the net short position in euro narrowing by $0.2bn to $9.0bn. The euro net short bets fell as investors increased both the gross longs and 2392 and 150 contracts respectively. The bullish Japanese yen sentiment was steady as volatile markets contributed to high haven demand for yen despite concerns about slowing economy as evidenced by jobless rate up-tick to 3.3% in February. The net long position in Japanese yen rose $98 million to $6.0bn. Investors increased the gross long positions by 2058 contracts and built the gross shorts by 1017. The British Pound sentiment continued to deteriorate: the net short position widened by $0.2bn to $3.6bn. Investors increased both the gross shorts and longs.

The sentiment improved substantially for the Canadian dollar with the net short position narrowing by $0.6bn to $0.4bn. Investors covered shorts and built the gross longs. The bullish sentiment toward the Australian dollar continued to strengthen with the net long position rising $0.4bn to $1.7bn. Investors increased both the gross longs and shorts. Sentiment toward the Swiss franc improved slightly. The net long position widened by $63 million to $0.6 billion. Investors cut both the gross longs and shorts.