Business Insider: Hedge Funds are Reportedly Shorting the Dollar as Fears Rise Over Its Status As the World's Number One Currency

August 17, 2020

Article by Saloni Sardana in Business Insider

Hedge funds are shorting the dollar and are bearish on the greenback for the first time since May 2018 in the latest sign that the world's top reserve currency is declining further and unlikely to bounce back any time soon. 

Bloomberg reported Monday, citing data from the Commodity Futures Trading Commission, that net futures and forward positions held by leveraged funds against eight currencies not including the dollar, fell to negative 7,881 contracts last week.

That means that more investors are betting against the dollar than on it right now. Bloomberg said the shorting spree was driven by bullish bets on the euro. 

The dollar has been weakening since the peak of the COVID-19 crisis

The revelation comes after months of dollar weakness. The bearishness has partly been attributed to the Fed's massive coronavirus stimulus programs. 

Expansionary monetary and fiscal policy tends to drive down bond yields, and lower interest rates. A lower interest rate makes saving in US dollars less attractive. 

The Dollar Index has fallen 9% since March and as of Monday is trading at around 93.05. 

The dollar weakness is said to be another key reason why investors have piled into gold. A weaker dollar means they can purchase larger quantities of the precious metal more cheaply

Looking ahead traders and policymakers anticipate the policy rate to not change until earliest the end of 2021 and Bloomberg economists expect an uptick in inflation at the start of ...

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