US Dollar plunged to fresh two years low as investors reacted strongly over the new trade tensions between the world’s largest economies along with rising concerns over slower than expected economic recovery. Commodity currencies inched up against the US dollar.

The reports of increasing short-bets have also impacted the US dollar. The questions over the greenback’s ability to sustain the status of reserve currency have been supporting bearish sentiments.

CFTC Commitments of Traders reported that net short positions on USD soared almost 1707 to 8182 contracts while long positions plunged 2152 contracts.

Almost 36% of fund managers said in a Bank of America survey that they have short positions on the currency this month, representing an increase of 30% compared to the last month. In addition, the report from Bank of America hinted that 40% of the fund managers expect a sharp drop in the US dollar reserve amount.

“This is the most bearish sentiment has been in our survey history, while positioning was last this underweight USD in 2008,” Banks of America said.

US dollar

The disappointment over the second federal aid stimulus program has also contributed to bearish sentiments over the last week. The US dollar index is currently trading around 92.68. This is the lowest level in more than two years.

“Positioning remains stretched on longs, making the cross vulnerable to a turn in sentiment, which has for a while been that of the EU handling the COVID-19 shock better than the US; this may change as US figures peak and Europe fights the second wave,” said Arne Lohmann Rasmussen, Chief Analyst, Head of Cross-Scandi Research at Danske Bank.

Euro remains strong against the US dollar while gold prices rebounded on the dollar weaknesses. Gold is currently trading around $1995 an ounce, down slightly from a previous all-time high of over $2000. The market analysts expect more gains for the yellow metal in the short term due to higher short bets on the US dollar.

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