Hedge Funds Are Least Bullish on Dollar in More Than One Year

  • Speculators cut bets on gains versus eight peers: CFTC data
  • Greenback set for worst month since April versus major peers

Hedge funds reduced wagers on dollar strength to the least since July 2014 as traders pushed back expectations for interest-rate increases, sending the currency heading toward its worst month since April.

Bets on gains by the greenback versus eight major peers outweighed those on a slump by a net 116,351 contracts in the week ended Feb. 23, a report from the Commodity Futures Trading Commission shows. That’s down from 168,905 contracts a week earlier.

The dollar’s 18-month rally has stalled this year as global volatility -- coupled with patchy U.S. economic data -- has encouraged investors to lower the likelihood of higher rates from the Fed. Hedge funds have reduced their positioning for dollar strength for the past five weeks as a result, after reaching a record 448,675 net longs in January 2015.

“The market over time had built a fairly large position, which was long dollar and, on the purely speculative side, it has essentially been somewhat disappointed,” said Sebastien Galy, director of foreign-exchange strategy in New York at Deutsche Bank AG. “There is a recognition that the dollar probably is too strong for the U.S.”

Large speculators cut their bets on dollar strength versus the euro to the least since June 2014, and lifted wagers on yen appreciation a third week, to the highest since February 2012.

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major peers, is down 1.7 percent this month. The U.S. currency has weakened 1 percent versus the euro and 6 percent against the yen.

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