Investors could close out early bets on the dollar if upcoming US inflation data prompts the market to reduce expectations of a Federal Reserve rate cut, Rabobank's Jane Foley said in a note. Commodity Futures Trading Commission data shows that speculators have consistently been net short the dollar, expecting a cut, since mid-June.
This makes the dollar vulnerable to speculators covering these positions, or short covering, especially given the challenges facing other G-10 currencies such as the French government crisis, the UK's budget woes, and the leadership contest in Japan's Liberal Democratic Party, she said. If Thursday's inflation data shakes rate cut bets, it could trigger dollar short covering and send the euro to $1.16 from its current $1.1725, she said. (alg)
Source: Dow Jones Newswires
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