Dollar Falls Most in Two Months as Traders Square Pre-Fed Bets

Updated on
  • Decline catches hedge funds positioned for further strength
  • Fed, BOE, SNB and Norges Bank all set to meet this week

Fed's Key Question Is How Fast to Raise Rates: Reinhart

The dollar plunged the most since September as traders squared positions before the Federal Reserve’s meeting this week, where policy makers are seen raising interest rates for the first time in a year.

The greenback fell the most since Sept. 21, setting session lows in the New York afternoon Monday versus the euro, pound and yen before the Fed begins its two-day meeting Tuesday. Traders unwound long-dollar positions after the greenback’s scorching post-election run, and selling may persist in the short-term, according to Toronto-Dominion bank. The dollar also dropped almost 1 percent or more against currencies of commodity exporters including Brazil, South Africa and Mexico.

  • Monday’s dollar weakness erased last week’s gain, as measured by BBDXY, when hedge funds and other money managers boosted net bullish positions to the highest since January, according to CFTC data
  • “As we approach year-end and the positioning is long, people are squaring positions," said Andres Jaime, a foreign-exchange strategist at Barclays Plc in New York. “Nobody wants to do anything until the Fed and inauguration.”
  • EUR/USD offers at 1.07 and USD/JPY bid at 114.40
  • “We expect the correction to persist in the near-term,” says Mark McCormick, North American head of foreign-exchange strategy at TD Bank. “The USD has clearly overshot.”
  • GBP offers at 1.2700 may cap gains, trader in New York says.
  • USD/JPY earlier rose to 10-month high; has gained more than 10 percent in past five weeks
  • Other stories:
    Barclays, JPMorgan, Citigroup Help U.S. Broaden Currency Probe