Monday, November 08, 2004

Bets Against Dollar

"Sixty percent of the traders, strategists and investors questioned on Nov. 5 from Tokyo to New York advised selling the dollar against the euro. Participants also said the U.S. currency will likely drop versus the yen, British pound, Swiss franc and Australian dollar.

Bets by hedge funds and other large speculators on the dollar to decline rose to a record on Nov. 2, the U.S. Commodities Futures Trading Commission reported at the end of last week. The difference in the number of wagers on a gain in the euro compared with a drop -- so-called net longs -- was 53,465, the most since Bloomberg began keeping records in 1999.

``The speculative market is overextended on dollar weakness and they're looking for a trigger to turn and run,'' said RBC Capital's Marta. "

How things have changed in just four years:

The U.S. last month reached the $7.384 trillion statutory limit on its ability to borrow, forcing the Treasury to shuffle funds in accounts until Congress acts to raise the ceiling. Treasury officials said lawmakers must raise the cap by Nov. 18 to avoid default.

Yields on the 10-year note rose to 4.25 percent on Nov. 5, the highest in almost a month, after the payrolls report. The yield on the two-year note, the most sensitive to changes in the benchmark interest rate, rose 23 basis points, to 2.81 percent, since the beginning of last week.

Two-year notes ``represent the best place if you do want to express bearishness,'' said Paul Calvetti, head of U.S. Treasury trading at Barclays Capital Inc. in New York, one of 22 primary dealers of U.S. government securities that trade with the Fed's New York branch.

I know. It's boring, but believe me - it's worth keeping on an eye on this stuff.


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