U.S Federal Reserve’s tilt towards tighter policy

Investors in the United States have been excited about the return since the Federal Reserve indicated last month that interest rates could rise sooner than previously thought. There are now signs that dollar bears are throwing in the towel as the US currency builds on its gains.

The data from the Commodity Futures Trading Commission that monitors the futures market jumped sharply this month. The net long position of speculative investors on the dollar index – which tracks the US currency against a basket of competitors – reached its highest level in more than a year with 11,257 contracts. A net long position indicates the difference between positive and negative bets.

CFTC figures also show that speculators – groups such as hedge funds that bet on currencies – are becoming more positive about the dollar’s outlook against the euro, the British pound and the yen.

While futures contracts make up only a small portion of the $ 6.6 tonne per day currency market, they provide an important and timely approach to investor sentiment.