Futures show that hedge funds and other large speculators are back on board for the dollar rally, after adding to bullish wagers on the U.S. currency for the first time in nine weeks.
The difference in the number of bets on a rise in the dollar compared with those on a loss against eight of the greenback’s major peers increased by 48,829 contracts in the week ended May 26, according to Commodity Futures Trading Commission data compiled by Bloomberg. So-called net long positions is 275,021 contracts, down from a record 448,675 in January.
Speculators had slashed bets on the greenback as a nine-month rally stalled in mid-March after the Federal Reserve reduced its projections for higher interest rates, eroding some of the currency’s appeal. Traders appear to be re-establishing their positions as signs the U.S. economy is improving bolster calls for the Fed’s first rate increase since 2006.
“From a positioning standpoint, there’s much more room to go,” said Dave Floyd, head of foreign-exchange trading and research at Aspen Trading Group in Bend, Oregon. “Unless the data comes in just really really lousy, it seems as though it’s still overall beneficial to the dollar.”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency versus 10 of its major peers, rose for a second straight week, adding 1 percent. The greenback touched a 12-year high versus the yen on Thursday and its strongest level in a month against the euro a day earlier.
U.S. reports on durable goods, new home sales and gross domestic product exceeded expectations this week, with a Citigroup Inc. index of economic surprises rising to its highest in a month.