Analysis-Bears circle weakening dollar as Fed rate cuts loom
NEW YORK, Sep 5 - The U.S. dollar's decline is gaining speed as anticipated interest rate cuts by the Federal Reserve threaten to end the greenback's years-long period of strength.
That yield advantage is set to diminish now that inflation has cooled and Fed Chairman Jerome Powell said last month the"time has come" to start cutting rates, a process expected to kick off at the central bank's Sept. 17-18 monetary policy meeting. How much further the dollar falls over the long term could depend on how deeply the Fed cuts rates in the months ahead, and how quickly other global banks follow suit.
Commodity Futures Trading Commission data tracking positioning by hedge fund and other speculative investors showed bets on the dollar swung net short to the tune of $8.83 billion for the week ended Aug. 27, the first bearish position in about six months. That compares to a net long of $32.6 billion in May.
Many are awaiting more evidence of a U.S. economic slowdown before turning more negative on the dollar. Trump has railed against the currency's strength, saying it hurts U.S. competitiveness. Yet many of his policies, such as tariffs and tax cuts, could strengthen the dollar, said Bardas.), wrote late last month that a Harris win could bring higher taxes and more pressure on the Fed to ease if economic activity slows.
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