USD: The Move Higher In UST Curve Triggers A Temp Shakeout In USD Shorts – MUFG

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The US dollar has shown some improvement of late. What has been the trigger for the upward move?

Here is their view, courtesy of eFXdata:

MUFG Research notes that the ongoing move higher in US yields is triggering a temporary shakeout of elevated short US dollar positions.

“The latest IMM report revealed that implied short US dollar futures positioning for Asset Manager/Institutional & Leveraged Funds had increased to a new record of 654,703 contracts as at the week ending 5th January. A notable increase compared to the start of last month when equivalent short US dollar positioning totalled 524,284 contracts,” MUFG notes.

The trigger for the squeeze on short US dollar positions has been the move higher in long-term US yields which has continued even after the weaker than expected non-farm payrolls report released on Friday. The yield on the 10-year US Treasury bond yield has hit an intra-day high of 1.12% and now stands around 20 basis points higher since the start of last week,” MUFG adds.

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Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.