Speculative traders have roughly doubled their short positions on the dollar since mid-March, the data showed. As of April 10, speculative traders had a total short position of $10.7 billion.
Investors expect that the six-month decline in the dollar may be far from over!
Since mid-March, according to calculations by data provider Refinitiv based on data from the U.S. Commodity Futures Trading Commission (CFTC),Speculative traders roughly doubled their short positions on the dollar，Indicating that hedge funds are betting that the dollar will fall further. Speculative traders added to their short positions in the latest weekly data ended April 10, bringing the total to $10.73 billion.
Wall Street Insights mentioned in previous articles,Michael Hartnett, the most accurate analyst on Wall Street since last year, Bank of America strategist, said in his latest report that the strong dollar has become a thing of the past, and the dollar index is expected to fall by 20%.
The dollar has been retreating since rising to a two-decade high in September last year as analysts scaled back expectations for U.S. interest rate hikes. The greenback hit its lowest level in a year against the euro and the dollar index last week.
Investors’ pessimistic expectations for the dollar have greatly highlighted the risk of a US recession.
After the outbreak of the small bank crisis in March, US banking loans experienced a “historical plunge”. One of the pillars of small bank loans – real estate loans fell the most since the 2007 subprime mortgage crisis.
“The shock to the U.S. banking sector … reinforces the view that the U.S. may enter a recession before other major economies,” which is negative for the dollar, said Ebrahim Rahbari, chief currency strategist at Citigroup.
In addition, the 2/10-year U.S. bond yield curve and the 3-month/10-year U.S. bond yield curve continue to invert… A series of economic recession indicators have once again turned red.
At present, the industry generally believes that if more and more evidence shows that the United States is entering a recession, the Fed will pause the pace of raising interest rates.
“Fundamentally, currencies are an extension of monetary policy — the dollar strengthened significantly at a time when the Fed was looking to tighten,” said Chris Turner, head of FX strategy at ING. The crisis has fueled signs of an economic slowdown, and that’s all changed.”
Another key is that,Continued aggressive interest rate hikes by other major central banks around the world will also weigh on the dollar.
The market expects that the European Central Bank will raise interest rates by 50 percentage points in May, and the Bank of England will raise interest rates by 50 basis points in September to continue fighting against high inflation. In addition, the outside world is constantly speculating that the new governor of the Bank of Japan, Kazuo Ueda, will gradually get rid of the ultra-loose monetary policy and return to the normal monetary policy track.
By contrast, the Fed is now widely expected to raise interest rates by 25 basis points in May.
Separately, Alan Ruskin, chief international strategist at Deutsche Bank, said: “After the conflict between Russia and Ukraine broke out last year, we saw pessimism about Europe fading, while other currencies also had their own positive performance.”
Ruskin emphasized,Europe’s economic outlook is brighterand predicts that Kazuo Ueda may reduce his long-term reliance on ultra-loose monetary policy under upward pressure on interest rates.
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