Why Is the Demand for the US Dollar Falling?



FED remains the happiest central bank

The US dollar failed to conquer new heights despite the optimism displayed by the Federal Reserve speakers in recent weeks. The US Dollar Index (UUP) reached a high of 99.8 on May 11, 2017, but it failed to move above the 100.00 level it last saw on April 17.

Except for a stellar jobs report that was released in the first week of May, all other US economic data came in below market expectations. Retail sales (XLP) and consumer prices have seen lower-than-expected rises, but the markets (SPY) remain focused on a rate hike in June.

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Bets on the US dollar’s fall

According to the Commitment of Traders report (or COT) released by the Commodity Futures Trading Commission (or CFTC), currency traders have reduced their bullish bets on the US dollar for the week.

Speculators prefer the euro to the dollar

The long positions of speculators and large traders amounted to a total of $11.0 billion, a fall of $1.7 billion compared to the previous week. Weakness in US economic data coupled with strong demand for the euro (FXE) following France’s election results could be behind the fall in the US dollar (USDU).

The euro has witnessed strong buying interest from large traders in the week following the French elections. Net positions in the shared currency rose by 24,052 contracts to 22,399 contracts, the highest level in the last three years. A net positive position for the euro means that traders are betting it will appreciate against the US dollar in the near term.


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