© Reuters. U.S. dollar bills are seen in the picture
By Saikat Chatterjee and Elizabeth Howcroft
LONDON (Reuters) – A rare gap has opened between a wide-track positioning meter and investor surveys pooled by the world’s top banks in the $ 6.6 trillion global currency market. Day.
Inclined investors, including some hedge funds, are pushing for a weaker U.S. dollar according to weekly futures data, while institutional investors are betting on more dollar gains, suggesting that the dollar strength is unlikely to fade soon.
With currency markets highly fragmented and spread across multiple time zones, market watchers usually rely on the weekly data from the Commodity Futures Trading Commission to get an idea of how investors are positioned in foreign exchange markets.
The latest data shows that investors had a negative $ 9.1 billion bet on the dollar in the week ending May. 5, making it the eighth consecutive week of short dollar stakes. But during this period, the dollar has risen almost 6% against a basket of other currencies.
“My impression is that these position data are not entirely indicative and should be taken with more than a pinch of salt,” said Francesco Pesole, a strategist at ING.
Hedge fund manager Stephen Jen of Eurizon SLJ Capital said CFTC data accounts for a small slice of currency trading and is dominated by highly leveraged and short-term commodity traders.
Broader position data from some of the world’s largest banks, including Morgan Stanley (NYSE :), BNP Paribas (OTC :), RBC and Citibank, which cover a larger set of flows, including trading on their own platforms, show that investors have increased their long dollar stakes in recent days.
1 / PERFORMANCE
A negative dollar outlook, especially in the second half of 2020, is based on the argument that a wider global economic recovery would encourage investors to invest dollar liquidity in relatively higher returns and faster-growing economies.
This view has not yet been realized, with some currencies heavily leveraged with the world economy’s trade at recent lows and approx. 25% so far this year. Only the perceived safe haven of Japanese yen is up against the dollar.
GRAPHICS: Dollar Performance – https://fingfx.thomsonreuters.com/gfx/mkt/rlgpdwarzvo/Dollar%20Performance.JPG
2 / POSITIONS
Weekly positioning data from the CFTC shows a slight reduction in short dollar rates over the past week, but they remain close to their highest levels for two years.
GRAPH: CFTC Dollar positions – https://fingfx.thomsonreuters.com/gfx/mkt/xlbpgnzqxvq/CFTC%20Dollar%20positions.JPG
3 / DATA
Data across banking platforms such as RBC, which take into account trades in the broader market, shows that long-dollar positions remain 30% larger than what CFTC data shows. Similar data from Citi’s trading platforms showed four-week flow trends for emerging-market currencies against the dollar remained strong in greenback’s favor among institutional investors.
GRAPH: RBC Data – https://fingfx.thomsonreuters.com/gfx/mkt/xegvbkqzdpq/RBC%20Data.JPG
4 / VIEWS
On Saxo Bank’s trading platforms, investors remain bullish on the dollar against the Swiss franc, pound and the euro at a time when the U.S. Treasury interest rates fell, reducing the dollar’s interest advantage over other currencies.
Stefanie Holtze-Jen, head of the dollar-based foreign exchange strategist at DWS Group, said the focus on the political response between the United States and Europe has been different.
“The former has been to achieve economic growth as quickly as possible, while Europe is prepared to forgo growth to alleviate the health crisis.”
GRAPHIC: Citi – https://fingfx.thomsonreuters.com/gfx/mkt/xklvykbxavg/Citi.JPG
GRAPH: MSP – https://fingfx.thomsonreuters.com/gfx/mkt/bdwpkrloovm/MSP.JPG