The US dollar trade is crowded
Stern warnings about overdone US dollar shorts are doing the rounds today but the dollar continues to struggle.
Last week, a Bank of America Merrill Lynch survey of 202 asset managers said the short-USD trade was the second-most crowded, trailing on long-Nasdaq. The tech trade has been at the top of the list for four months.
The dollar trade has flipped this year. From December 2016 to April 2017, the long dollar trade was viewed as the most crowded in the same survey.
The latest CFTC positioning data showed some traders are listening as the USD net short position ebbed after hitting the most extreme since 2013 two weeks ago.
Today, Bloomberg has a story saying the trade is overdone.
"The positioning is so skewed" against the greenback, said Paresh Upadhyaya, a portfolio manager at Amundi Pioneer Asset Management, which manages about $83 billion. "It's the number one factor behind my short-term positive view on the dollar."
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"All it will take is one little catalyst," Brad Bechtel, managing director of currencies at Jefferies LLC said on the dollar's rebound. Any progress on U.S. tax reform or a stimulus bill could do the trick, he said. "That squeeze could happen pretty quickly and be pretty violent."
What makes me worried is that so many people are saying the same thing. There is this persistent belief in the US dollar. So while it seems 'everyone' is short, I don't see the commitment in the trade. It's like a reluctant short and that's the kind of trade that lasts.
