The USD index continues trading in a tight range around 93 levels amid bullish economic reports that are offsetting Federal Reserve’s low-interest-rate policy. The USD index recovered from twenty-seven months low last week as US jobs came in better than expectations. Strong services and manufacturing data is also adding to investor’s sentiments.
The US nonfarm payroll data jumped by 1.371 million last month, up sharply from analysts’ expectations. The growth in jobs helped in lowering the unemployment rate from 10.2% in July to 8.4% in August.
“However, this data does not change the U.S. Federal Reserve’s stand on more stimulus to be pumped into the economy and its take on tolerating a higher inflation rate, keeping gold supported in the long run,” said Michael Matousek, head trader at U.S. Global Investors.
The investors have also lowered their short bets on the greenback. The CFTC Commitments of Traders report indicated that net shorts for USD Index futures plunged by 1027 to 6746 contracts last week.
Meanwhile, speculative long positions grew by 766 contracts and short positions dropped by 261 contracts. In addition, market analysts expect a steady decline in short positions in the coming days as the economy is likely to recover at a faster pace.
On the other hand, the net short position on the euro increased sharply as traders believe the European Central bank could take action to interrupt the common currency rally against the US dollar. However, long bets on the British Pound surged last week.
Last week, the USD index has reported the largest weekly gain in the last two months. The USD index has hit 91.7 level at the beginning of the week but the greenback recovered in the last three sessions.
“The dollar’s loss-making momentum has stopped a little bit and the recent ECB comments on the euro have also helped but the broader direction of monetary policy making will be a key factor going ahead,” said Ulrich Leuchtmann, an analyst at Commerzbank.