Hedge Funds Abandon Bullish Dollar Bets on Peak Fed Speculation

(Bloomberg) — Hedge funds have swung to an overall bearish dollar bet for the first time since March on a wager the Federal Reserve is finally approaching the end of its interest-rate hiking cycle.

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Leveraged investors flipped to a net short position on the US currency of 20,091 contracts in the week through July 7, according to data from the Commodity Futures Trading Commission aggregated by Bloomberg. They were long by a net 5,196 contracts a week earlier.

Bloomberg’s gauge of the dollar has dropped 1.6% this year on signs the Fed is nearing the end of its tightening cycle and as the rest of the world has caught up in raising rates to combat inflation. US employers added fewer jobs in June than economists forecast, payroll data showed Friday, boosting the confidence of dollar bears betting the central bank will start easing policy sooner rather than later.

“With the US nonfarm payrolls behind us, we look to the US CPI report as the next big risk for markets,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note. “Ahead of this, we’ve seen dollar sellers start to dominate with euro-USD eyeing a retest of the June 22 high of 1.1012, and dollar-yen 300 pips off its recent high.”

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