July 24, 2023 (MLN): Asset managers boosted bearish dollar bets to a record amid speculation slowing US inflation will hasten the end of the Federal Reserve’s 16-month run of policy tightening, as Bloomberg reported.
Institutional investors, including pension funds, insurers, and mutual funds, increased net short position on the greenback by 18% to 568,721 contracts in the week through July 18, according to data on eight currency pairs from the Commodity Futures Trading Commission and aggregated by Bloomberg.
“We have been gaining this confidence that inflation will come down quite significantly over the coming quarters in the US,” Rodrigo Catril, a senior foreign-exchange strategist at National Australia Bank Ltd., said on Bloomberg Television.
“That in itself will encourage the market to believe the Fed not only is done but it will be contemplating rate cuts toward the turn of the year, and that will be a significant downturn for the US dollar,” he added.
Asset managers boosted dollar net shorts by the most against the euro and pound among the eight currencies, the data compiled by Bloomberg show. At the same time, they cut yen shorts by the most since March 2020.
The market is positioning for a number of key central bank policy decisions this week, including the Fed on Wednesday, the European Central Bank Thursday, and the Bank of Japan Friday.
