From http://on.wsj.com/2E1fVdH:
By Saumya Vaishampayan
Jan 30, 2018 4:21 am ET
The dollar just can’t catch a break: long-term investors have collectively turned negative on the U.S. currency this year for the first time since 2014.
Asset managers—the likes of pension funds, endowments and some mutual funds—now hold more bearish futures and options contracts tied to the ICE U.S. Dollar Index than bullish ones, and they have done so all year, according to data from the U.S. Commodity Futures Trading Commission.
Put another way, these investors, who together control hundreds of billions of dollars of investment money, are now betting the dollar will get weaker. The last time these investors held a negative view on the greenback was nearly four years ago, but it only lasted a week and the net number of bearish contracts they held was negligible.
The market data is the latest sign that strong economic growth around the world, not just in the U.S., has boosted the relative appeal of stocks, bonds and currencies in places like Europe and emerging markets. Big investors’ decision to rotate money out of U.S. markets and into other regions has helped drive the dollar lower over the past year, analysts say.
The bearish view held by asset managers contrasts with the current collective stance of hedge funds and other leveraged investors, who started betting on a stronger dollar after President Donald Trump signed the tax overhaul bill into law in late December. Hedge funds had been negative on the dollar for much of the second half of 2017.
“Near-term, leveraged fund positioning tends to correlate with price action for currencies, while asset managers’ money is more sticky,” said Khoon Goh, head of Asia research at Australia and New Zealand Banking Group in Singapore, who tracks CFTC data for both asset managers and hedge funds.
The dollar rose 0.2% by Tuesday afternoon in Asia, based on the ICE index, which measures the dollar against the euro, yen and four other currencies. The euro fell 0.3% against the dollar while the British pound dropped 0.6%.
[see article on WSJ for chart]
Of course, the data in this chart represent a small slice of the total foreign-exchange market, as they reflect only futures and options bets tied to the ICE U.S. dollar index, not heavily traded currency pairs like the euro versus the dollar or the dollar against the Japanese yen. Mr. Goh estimates these asset managers are the most net bearish on the U.S. dollar on record when measured against the euro, yen and other major currencies.
Still, it’s a piece of evidence in the $5.1 trillion-a-day currency market that shows how investors are simply finding better opportunities in non-dollar assets.
Submitted January 30, 2018 at 07:22AM by mepcotterell http://ift.tt/2rS3hbN
