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.
Oscars in the UAE
The 90th Academy Awards will be aired in the UAE from 3.30am on Monday, March 5 on OSN, with the ceremony starting at 5am
Business Insights
- As per the document, there are six filing options, including choosing to report on a realisation basis and transitional rules for pre-tax period gains or losses.
- SMEs with revenue below Dh3 million per annum can opt for transitional relief until 2026, treating them as having no taxable income.
- Larger entities have specific provisions for asset and liability movements, business restructuring, and handling foreign permanent establishments.
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
Paatal Lok season two
Directors: Avinash Arun, Prosit Roy
Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong
Rating: 4.5/5
Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
- Stay invested: Time in the market, not timing the market, is critical to long-term gains.
- Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
- Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
MORE ON IRAN'S PROXY WARS
How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
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German intelligence warnings
- 2002: "Hezbollah supporters feared becoming a target of security services because of the effects of [9/11] ... discussions on Hezbollah policy moved from mosques into smaller circles in private homes." Supporters in Germany: 800
- 2013: "Financial and logistical support from Germany for Hezbollah in Lebanon supports the armed struggle against Israel ... Hezbollah supporters in Germany hold back from actions that would gain publicity." Supporters in Germany: 950
- 2023: "It must be reckoned with that Hezbollah will continue to plan terrorist actions outside the Middle East against Israel or Israeli interests." Supporters in Germany: 1,250
Source: Federal Office for the Protection of the Constitution
Wicked
Director: Jon M Chu
Stars: Cynthia Erivo, Ariana Grande, Jonathan Bailey
How to help
Send “thenational” to the following numbers or call the hotline on: 0502955999
2289 – Dh10
2252 – Dh 50
6025 – Dh20
6027 – Dh 100
6026 – Dh 200
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
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Game Changer
Director: Shankar
Stars: Ram Charan, Kiara Advani, Anjali, S J Suryah, Jayaram
Rating: 2/5
If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.
When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.
How to get there: Emirates currently flies from Dubai to Orlando five times a week.
More from Neighbourhood Watch:
Emergency
Director: Kangana Ranaut
Stars: Kangana Ranaut, Anupam Kher, Shreyas Talpade, Milind Soman, Mahima Chaudhry
Rating: 2/5
UAE currency: the story behind the money in your pockets
OPINIONS ON PALESTINE & ISRAEL
Everton%20Fixtures
%3Cp%3EApril%2015%20-%20Chelsea%20(A)%3Cbr%3EApril%2021%20-%20N.%20Forest%20(H)%3Cbr%3EApril%2024%20-%20Liverpool%20(H)%3Cbr%3EApril%2027%20-%20Brentford%20(H)%3Cbr%3EMay%203%20-%20Luton%20Town%20(A)%3Cbr%3EMay%2011%20-%20Sheff%20Utd%20(H)%3Cbr%3EMay%2019%20-%20Arsenal%20(A)%3C%2Fp%3E%0A
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Learn more about Qasr Al Hosn
In 2013, The National's History Project went beyond the walls to see what life was like living in Abu Dhabi's fabled fort:
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The specs
Engine: 4 liquid-cooled permanent magnet synchronous electric motors placed at each wheel
Battery: Rimac 120kWh Lithium Nickel Manganese Cobalt Oxide (LiNiMnCoO2) chemistry
Power: 1877bhp
Torque: 2300Nm
Price: Dh7,500,00
On sale: Now
MATCH INFO
League Cup, last 16
Manchester City v Southampton, Tuesday, 11.45pm (UAE)
Jigra
Starring: Alia Bhatt, Vedang Raina, Manoj Pahwa, Harsh Singh
The Great Derangement: Climate Change and the Unthinkable
Amitav Ghosh, University of Chicago Press
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
Other workplace saving schemes
- The UAE government announced a retirement savings plan for private and free zone sector employees in 2023.
- Dubai’s savings retirement scheme for foreign employees working in the emirate’s government and public sector came into effect in 2022.
- National Bonds unveiled a Golden Pension Scheme in 2022 to help private-sector foreign employees with their financial planning.
- In April 2021, Hayah Insurance unveiled a workplace savings plan to help UAE employees save for their retirement.
- Lunate, an Abu Dhabi-based investment manager, has launched a fund that will allow UAE private companies to offer employees investment returns on end-of-service benefits.