Hedge funds short sell US dollar futures.

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The US dollar index fell to a two-year low of 91.775.
Short selling by hedge funds remains at its highest level for about a decade.
Currency experts forecast a further downward movement of the US dollar.

On September 1, the US dollar fell to a multi-year low against most major currencies. Investors expect that the Federal Reserve’s new policy framework would lead to lower US interest rates compared to rates in other countries. The dollar index fell to a two-year low of 91.775.

The Dollar Index is expected to remain volatile in the coming periods as the first week of September is full of macroeconomic data related to manufacturing, durable goods and employment data releases.

Hedge Funds and the US Dollar

According to the latest data collected by the CFTC (Commodity Futures Trading Commission), hedge fund managers are betting against the US dollar in the future markets. Short selling remains at its highest level for about a decade. The possible reasons for the pessimistic views on the US dollar could be Historically low US interest rates, a more robust recovery of economic growth in other parts of the world compared to the US, and the possibility of higher budget deficits in connection with the pandemic economic stimulus programs.

Continued decline of the US dollar

Historically, the US dollar has been considered the currency of refuge in times of crisis. This was demonstrated in March, when the US dollar suddenly jumped when Covid-19 was first introduced. Since then, the US dollar has shown a sustained downward movement. It lost almost 10.5% from its peak and is now 4.5% below its previous high for the year.

Slump in the US dollar – directional views

The Connecticut-based currency manager at A.G. Bisset expects the U.S. dollar to drop 36% against the euro over the next year or so, something that has not happened for more than a decade.

CEO Lindhal’s analysis is based on the cyclical movement of the US dollar against the euro over a period of 15 years on a continuous basis. AG Bisset is a currency management specialist offering dynamic hedging and currency alpha strategies for institutional investors. The details of the 15-year dollar cycle can be found here…

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