US Markets

Dollar gains as investors unwind positions after weakest month in a decade

Credit: REUTERS/

The dollar was up against a basket of currencies on Monday as investors unwound some recent short positions following the currency's weakest monthly performance in a decade.

By Caroline Valetkevitch

NEW YORK, Aug 3 (Reuters) - The dollar was up against a basket of currencies on Monday as investors unwound some recent short positions following the currency's weakest monthly performance in a decade.

The dollar index =USD, which measures the greenback against a basket of leading currencies, posted a more than 4% decline for July, its biggest monthly drop since September 2010.

The weakness has been tied to market expectations for further easing of U.S. monetary policy, and a lack of agreement among U.S. lawmakers on further fiscal stimulus. Falling U.S. bond yields have also been cited as a factor.

The day's gains may be tied to investors partially moving out of the crowded short position, strategists said.

"Sentiment was overdone," said Marc Chandler, chief market strategist at Bannockburn Global Forex. "The swing in the pendulum of market sentiment hit such an extreme," which allowed for some unwinding of those short positions, he said.

"I don't expect it to last long," he added.

The dollar pared gains following weaker-than-expected U.S. economic data. U.S. construction spending fell to a one-year low in June; economists had forecast an increase.

The dollar index was last up 0.5% =USD at 93.836.

Speculators' net shorts on the U.S. dollar have soared to their highest since August 2011 at $24.27 billion, Reuters calculations and U.S. Commodity Futures Trading Commission data show. IMM/FX

Against the Japanese yen, the dollar gained 0.4% to push past the 106-yen-per dollar mark. JPY=

On Friday, the dollar posted its biggest daily rise against the Japanese currency since March, halting a rally in the yen which saw it gain 3% in July.

Japanese Finance Minister Taro Aso described the yen's recent rise as "rapid" on Friday, signaling concern that a strong currency could do more damage to an export-led economy already in recession.

A growing U.S. fiscal deficit to finance the stimulus prompted Fitch Ratings to revise its outlook on the United States' triple-A rating to negative from stable.

Sentiment on the euro has improved after European Union leaders agreed last month to a 750 billion euro ($882 billion) economic recovery fund while also taking on debt jointly in a show of regional cooperation.

The single currency last traded at $1.1727 EUR=EBS, down 0.4%. It hit a two-year high of $1.1908 reached last week.

========================================================

Currency bid prices at 10:47AM (1447 GMT)

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Euro/Dollar

EUR=

$1.1727

$1.1774

-0.40%

+4.62%

+1.1796

+1.1698

Dollar/Yen

JPY=

106.3000

105.8800

+0.40%

-2.35%

+106.4600

+105.5900

Euro/Yen

EURJPY=

124.69

124.68

+0.01%

+2.25%

+125.0600

+124.0200

Dollar/Swiss

CHF=

0.9237

0.9127

+1.21%

+0.00%

+0.9240

+0.9115

Sterling/Dollar

GBP=

1.3012

1.3088

-0.58%

+0.00%

+1.3111

+1.3006

Dollar/Canadian

CAD=

1.3419

1.3413

+0.04%

+3.33%

+1.3450

+1.3390

Australian/Dollar

AUD=

0.7087

0.7142

-0.77%

+0.94%

+0.7149

+0.7077

Euro/Swiss

EURCHF=

1.0834

1.0755

+0.73%

+0.00%

+1.0838

+1.0754

Euro/Sterling

EURGBP=

0.9011

0.8995

+0.18%

+0.00%

+0.9014

+0.8983

NZ Dollar/Dollar

NZD=

0.6579

0.6632

-0.80%

+0.00%

+0.6642

+0.6576

Dollar/Norway

NOK=

9.1553

9.0860

+0.76%

+0.00%

+9.1763

+9.0729

Euro/Norway

EURNOK=

10.7394

10.7416

-0.02%

+0.00%

+10.7861

+10.6923

Dollar/Sweden

SEK=

8.7827

8.7680

-0.43%

+0.00%

+8.8083

+8.7556

Euro/Sweden

EURSEK=

10.3003

10.3450

-0.43%

+0.00%

+10.3515

+10.2885

GRAPHIC: Dollar's worst monthly performance in a decadehttps://tmsnrt.rs/3k28ghc

GRAPHIC: World FX rates in 2020https://tmsnrt.rs/2RBWI5E

(Reporting by Caroline Valetkevitch; Additional reporting by Ritvik Carvalho in London; Editing by David Goodman, Hugh Lawson and Jonathan Oatis)

((caroline.valetkevitch@thomsonreuters.com; +1 646 223 6393; Reuters Messaging: caroline.valetkevitch.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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