Fund managers are gaining more dollar shorts, with Fed rate hikes anticipated

Asset managers are getting more pessimistic on the dollar. This is due to the policy of monetary tightening set by the U.S. Federal Reserve (Fed). So, the country's cycle of interest rate growth is expected to peak. 

Investors increased short positions on the dollar to 321,758 contracts last week. The Commodity Futures Trading Commission (CFTC) data, published by Bloomberg, showed that the figure hit a high for the first time since July 2021. The hedge fund industry is also dominated by bearish sentiment towards the dollar. This includes five consecutive weeks of its selling.

John Bromhead, a strategist at Australia & New Zealand Banking Group Ltd. said the dollar’s value is declining as the Fed continues to be hawkish. 

The market is heated with debate that the days of US dollar dominance may be numbered. It happens amid the recent statements of the Fed representatives on slowing down the pace of rate hikes, along with declining inflation rate. Goldman Sachs Group Inc. and Wells Fargo are among the proponents of further strengthening of the U.S. currency. M&G Investments, on the other hand, argues that the regulator will continue its tightening cycle while being cautious. 

The Bloomberg Dollar Spot index fell nearly 5 % from its September peak and gained 0.1 % in Asian trading on Monday.