NEW YORK (Reuters) - Speculators slashed net long positions on the U.S. dollar in the latest week to their lowest level since last August, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.
The value of the dollar’s net long position slid to $6.48 billion in the week ended June 13, from $8.0 billion the previous week.
Up until the Federal Reserve’s interest rate hike on Wednesday, the dollar had been on a declining trend this year amid a spate of soft data such as U.S. inflation and non-farm payrolls.
Aside from the rate increase, the Fed also maintained its outlook for a total of three interest rate increases this year as well as three more projected for 2018. It also announced a quicker-than-expected start to the unwinding its balance sheet beginning this year.
The Fed viewed the U.S. economy’s soft patch as temporary in nature and should not affect its tightening stance. Analysts said this should help the dollar’s prospects.
“A dovish Bank of Japan and European Central Bank have helped support the dollar with dollar/yen and euro/dollar showing possible reversal signs in their respective bearish and bullish trends,” said London-based Fawad Razaqzada, market analyst at Forex.com.
“Thus, the dollar may be able to appreciate despite the weakness in U.S. macro figures. For now, investors are giving the Fed the benefit of the doubt – only just.”
The dollar index so far this year though was still down nearly 5.0 percent, on track for its worst yearly performance in 10 years.
Euro net longs, meanwhile, rose to a more than six-year high, with 79,053 contracts, CFTC data showed.
Ahead of the Fed’s midweek rate meeting, the euro had climbed to highs for the year against the dollar, in line with increasing long speculative positioning on the currency.
Friday’s data from Europe, however, suggested little scope for the ECB to back off its low rate policies as inflation was confirmed at a slower rate of 1.4 percent annually in May, below the bank’s target, said Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington.
In other currencies, sterling net shorts rose to their largest since early May, with 39,441 contracts.
The pound has been under a cloud of political uncertainty after Prime Minister Theresa May weakened her mandate with a disappointing performance in last week’s UK election.
Reporting by Gertrude Chavez-Dreyfuss; editing by Diane Craft