Hedge funds shorting US Dollar futures

By: Nik Khandelwal
Nik Khandelwal
Nik is an experienced Analyst, Trader and Financial Consultant for Global Capital Markets. He is a Chartered Financial Analyst… read more.
on Sep 1, 2020
Updated: Sep 2, 2020
  • The US Dollar index fell to a two-year low at 91.775.
  • The Hedge Fund shorting remains at their highest levels in about a decade.
  • Currency experts are forecasting further downward movement in the US Dollar.

On September 1st, the US Dollar dropped towards multi-year lows against most major currencies. Investors are expecting the Federal Reserve’s new policy framework would translate into lower US interest rates as compared to interest rates in other countries. The dollar index fell to a two-year low at 91.775. 

The dollar index volatility is expected to continue in the coming periods as the first week of September is full of macroeconomic data related to manufacturing, durable goods, and employment data news.  

Economic Calender for the first week of Septmeber 2020

Hedge Funds and US Dollar 

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As per the latest data collected by the CFTC (Commodity Futures Trading Commission), hedge fund managers bets against the US Dollar in future markets. The shorting remains at their highest levels in about a decade. The possible reasoning for the bearish views on the US Dollar could be – Historically low benchmark US interest rate, more robust economic growth recoveries in the other parts of the world as compared to the US, and possibility of increased fiscal deficits related to pandemic’s economic stimulus programs. 

US Dollar Index and CFTC speculative currency positions

US Dollar Sustained Downward Movement

Historically, the US Dollar is considered to be the safe-haven currency in the times of crisis. This has been reflected in March, where the US Dollar has shown a sudden spike on the first introduction of Covid-19. Since then, the US Dollar has demonstrated a sustained downward movement. It lost almost 10.5% from its high and is now down 4.5% year to date. 

US Dollar Index DXY Graph

Bearish US Dollar Direction Views 

Connecticut based A.G. Bisset’s currency manager has been expecting the US Dollar currency will plunge 36% against the Euro currency over the next year or so, which has not occurred in more than ten years. 

CEO Lindhal’s analysis is based on the cyclical movement of the US Dollar as against the Euro over a period of 15 years on a continuous basis. AG Bisset is a currency management specialist that provides dynamic hedging and currency alpha strategies for institutional investors. The details on the 15-Year Dollar Cycle can be found here

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