US dollar bullish bets hit seven year low

US dollar bullish bets fell to seven year low of $0.39 billion from $2.1 billion in the previous week against the major currencies, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to April 12. Major economic data provided some indication of positive effect of weaker dollar on external sector as import prices rose 0.2% in March from negative 0.4% in the previous month. The other positive development were flat export prices in March after they fell 0.5% in February. These developments may result in improved trade balance for March after the trade deficit actually widened in February. And while the Institute for Supply Management Non-Manufacturing PMI rose to 54.5 in March from 53.4 in February, ISM Non-Manufacturing Prices index still indicates a decline for March as it edged up to 49.1 from 45.5 in the previous month, staying below the 50 level. And Federal Reserve Open Market Committee March meeting minutes showed several Fed officials were opposed to an April rate hike which would signal an inappropriate sense of urgency given downside risks from volatile financial markets and slowing global growth. The data clearly didn’t improve the outlook for interest rate hike in April which resulted in reduction of bullish bets for US dollar. As is evident from the Sentiment table, sentiment improved for all major currencies except for the British Pound. And the euro and the British Pound are still the only major currencies held net short against the US dollar.

The bearish euro sentiment moderated with the net short position in euro narrowing by $0.2bn to $7.4bn. The euro net short position fell as investors reduced the gross longs and covered shorts by 8798 and 10234 contracts respectively. The bullish Japanese yen sentiment continued to strengthen with the net long position in Japanese yen rising $0.8bn to $7.6bn. Investors increased the gross long position by 1990 contracts and cut the gross shorts by 4127. The British Pound sentiment deteriorate at roughly the past week’s pace as the net short position widened by $0.4bn to $4.5bn. Investors cut both the gross longs and shorts.

The sentiment continued to improve for the Canadian dollar ahead of the Bank of Canada interest rate decision: the net longs rose $180 million to $187 million. Investors covered shorts and reduced the gross longs. The bullish sentiment toward the Australian dollar continued to strengthen at an accelerated pace with the net long position rising $0.6bn to $2.6bn. Investors increased both the gross longs and gross shorts. Sentiment toward the Swiss franc continued to improve. The pace of widening of net long position almost tripled compared with the past week as net longs increased by $339 million to $1.0 billion. Investors built gross longs as they cut the gross shorts.