US Dollar Bulls’ Futures Positions Reach Record on Fed Speculation

Chicago (Jan 10)  Traders increased futures positions that profit from a gain in the dollar to a record this week, ignoring warnings that positions are overstretched with the Federal Reserve planning to raise interest rates this year.

Hedge funds and other large speculators boosted futures contracts on the U.S. currency’s strength versus eight of its major peers to 431,961 as of Jan. 6, the most in data going back to 2003, according to Commodity Futures Trading Commission data compiled by Bloomberg. So-called net longs totaled 404,766 a week earlier.

The dollar, which gained against all of its 31 major peers last year, is rallying as the Fed weighs timing for its first increase in borrowing costs since 2006, while central banks in Europe and Japan examine further stimulus.

Positioning is extreme, suggesting “a correction seems likely very soon,” Kit Juckes, a London-based global strategist at Societe Generale SA, wrote in a note Jan. 6.

The Bloomberg Dollar Spot Index slipped 0.6 percent to 1,141.13 as of 4:45 p.m. in New York, falling from its highest closing level in at least 10 years.

Traders also added to wagers against the euro, CFTC data show. The difference in the number of positions on euro losses versus those on gains -- net shorts -- rose to 161,040, the most since November.

Source: Bloomberg