Hedge funds are making their biggest bet in seven years that the dollar will weaken as evidence mounts that US economic momentum is slowing, thus limiting the scope for higher interest rates.
The flattest yield curve in over a decade, with the gap between 10-year and two-year US yields shrinking to just 46 basis points, suggests the current trajectory of Fed tightening is already putting the brakes on the economy.
Trouble is, there are signs that growth is slowing in other major economies too, meaning other currencies will also come under downward pressure. The greenback may not fall as far or as fast as speculators are banking on.
Even if the Fed delivers only three more rate hikes this year rather than the four that had been widely expected, that could still be three more than we get from the European Central Bank, Bank of Japan or Bank of England.
Short-term bond yield differentials, often seen as a key driver of exchange rates, certainly don't fit with a short dollar strategy. The two-year US-German yield spread is nearly 300 basis points, the widest in favour of the dollar since 1989.
All of which explains why the dollar hasn't really gone anywhere at all for the last few months and why speculators are struggling to make money on their huge short dollar positions.
Chicago futures markets data show that hedge funds and other speculators now hold the biggest short dollar position since August 2011.
According to calculations by Reuters and Commodity Futures Trading Commission data, the value of that bet, derived from net positions of International Monetary Market speculators across a range of major and emerging currencies, now stands at $27.2 billion.
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Almost all of that is made up of a net long euro position of 147,463 contracts, the second most on record, worth $22.8bn.
Hedge funds trading currencies and rates had a difficult first quarter, in large part thanks to the "volmageddon" burst of extreme market volatility in early February that crushed momentum and trend-following strategies.
Eurekahedge's CTA/Managed Futures hedge fund index fell 0.33 per cent in March, and was down 1.54 per cent over the quarter, while its Macro hedge fund index fell 0.71 per cent in March and was down 0.4 per cent in the quarter. Currency trading is a big part of these two indices.
Eurekahedge's FX index fell 0.98 per cent in March, and is down 0.2 per cent year to date. The dollar index, a measure of the greenback's value against a basket of major currencies, has barely moved since mid-January, confined to a narrow range of 88.5-91.0.
But you can see why hedge funds and speculators are shorting the dollar. The Atlanta Fed's GDPNow forecast model now predicts 2 per cent annualised GDP growth in the first quarter. It was 3.5 per cent at the start of March.
The latest US employment and consumer confidence figures were among a growing raft of economic indicators to undershoot expectations. Citi's economic surprises index has tumbled this month, and is now the lowest since October.
But it's still in positive territory, unlike the comparable euro zone, UK and Japanese indices. Citi's euro-zone economic surprises index, in particular, has fallen off a cliff in recent weeks and is now its lowest since June 2012.
All this suggests there's not much upside to the dollar's main competitors either. And in the relative world of exchange rates, not all currencies can depreciate at the same time.
Shorting the dollar is proving to be a risky gamble. The larger that bet grows without an accompanying fall in the dollar, the greater the chance that speculators throw in the towel and cut their short positions.
COMPANY PROFILE
Name: Xpanceo
Started: 2018
Founders: Roman Axelrod, Valentyn Volkov
Based: Dubai, UAE
Industry: Smart contact lenses, augmented/virtual reality
Funding: $40 million
Investor: Opportunity Venture (Asia)
The biog
Full name: Aisha Abdulqader Saeed
Age: 34
Emirate: Dubai
Favourite quote: "No one has ever become poor by giving"
UEFA CHAMPIONS LEAGUE FIXTURES
All kick-off times 10.45pm UAE (+4 GMT) unless stated
Tuesday
Sevilla v Maribor
Spartak Moscow v Liverpool
Manchester City v Shakhtar Donetsk
Napoli v Feyenoord
Besiktas v RB Leipzig
Monaco v Porto
Apoel Nicosia v Tottenham Hotspur
Borussia Dortmund v Real Madrid
Wednesday
Basel v Benfica
CSKA Moscow Manchester United
Paris Saint-Germain v Bayern Munich
Anderlecht v Celtic
Qarabag v Roma (8pm)
Atletico Madrid v Chelsea
Juventus v Olympiakos
Sporting Lisbon v Barcelona
COMPANY PROFILE
Company name: Revibe
Started: 2022
Founders: Hamza Iraqui and Abdessamad Ben Zakour
Based: UAE
Industry: Refurbished electronics
Funds raised so far: $10m
Investors: Flat6Labs, Resonance and various others
SPECS
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
The specs
Engine: 2.9-litre twin-turbo V6
Power: 540hp at 6,500rpm
Torque: 600Nm at 2,500rpm
Transmission: Eight-speed auto
Kerb weight: 1580kg
Price: From Dh750k
On sale: via special order
Sinopharm vaccine explained
The Sinopharm vaccine was created using techniques that have been around for decades.
“This is an inactivated vaccine. Simply what it means is that the virus is taken, cultured and inactivated," said Dr Nawal Al Kaabi, chair of the UAE's National Covid-19 Clinical Management Committee.
"What is left is a skeleton of the virus so it looks like a virus, but it is not live."
This is then injected into the body.
"The body will recognise it and form antibodies but because it is inactive, we will need more than one dose. The body will not develop immunity with one dose," she said.
"You have to be exposed more than one time to what we call the antigen."
The vaccine should offer protection for at least months, but no one knows how long beyond that.
Dr Al Kaabi said early vaccine volunteers in China were given shots last spring and still have antibodies today.
“Since it is inactivated, it will not last forever," she said.
Scotland v Ireland:
Scotland (15-1): Stuart Hogg; Tommy Seymour, Huw Jones, Sam Johnson, Sean Maitland; Finn Russell, Greig Laidlaw (capt); Josh Strauss, James Ritchie, Ryan Wilson; Jonny Gray, Grant Gilchrist; Simon Berghan, Stuart McInally, Allan Dell
Replacements: Fraser Brown, Jamie Bhatti, D'arcy Rae, Ben Toolis, Rob Harley, Ali Price, Pete Horne, Blair Kinghorn
Coach: Gregor Townsend (SCO)
Ireland (15-1): Rob Kearney; Keith Earls, Chris Farrell, Bundee Aki, Jacob Stockdale; Jonathan Sexton, Conor Murray; Jack Conan, Sean O'Brien, Peter O'Mahony; James Ryan, Quinn Roux; Tadhg Furlong, Rory Best (capt), Cian Healy
Replacements: Sean Cronin, Dave Kilcoyne, Andrew Porter, Ultan Dillane, Josh van der Flier, John Cooney, Joey Carbery, Jordan Larmour
Coach: Joe Schmidt (NZL)
Biography
Favourite book: Zen and the Art of Motorcycle Maintenance
Holiday choice: Anything Disney-related
Proudest achievement: Receiving a presidential award for foreign services.
Family: Wife and three children.
Like motto: You always get what you ask for, the universe listens.
Company Profile
Name: HyveGeo
Started: 2023
Founders: Abdulaziz bin Redha, Dr Samsurin Welch, Eva Morales and Dr Harjit Singh
Based: Cambridge and Dubai
Number of employees: 8
Industry: Sustainability & Environment
Funding: $200,000 plus undisclosed grant
Investors: Venture capital and government
Specs: 2024 McLaren Artura Spider
Engine: 3.0-litre twin-turbo V6 and electric motor
Max power: 700hp at 7,500rpm
Max torque: 720Nm at 2,250rpm
Transmission: Eight-speed dual-clutch auto
0-100km/h: 3.0sec
Top speed: 330kph
Price: From Dh1.14 million ($311,000)
On sale: Now
The specs
Engine: Single front-axle electric motor
Power: 218hp
Torque: 330Nm
Transmission: Single-speed automatic
Max touring range: 402km (claimed)
Price: From Dh215,000 (estimate)
On sale: September
SPECS: Polestar 3
Engine: Long-range dual motor with 400V battery
Power: 360kW / 483bhp
Torque: 840Nm
Transmission: Single-speed automatic
Max touring range: 628km
0-100km/h: 4.7sec
Top speed: 210kph
Price: From Dh360,000
On sale: September