Dollar Longs Stage Sharp Comeback as US Yields Surge

Hedge funds and speculators staged a sharp comeback in their dollar long positions during the week ending September 22, as surging US Treasury yields and renewed expectations of Federal Reserve tightening restored the dollar's carry appeal.

The combined dollar long position jumped to $18.4 billion, reversing seven consecutive weeks of reduction that had seen it fall from a record high of $50 billion in July. This rebound was driven by aggressive buying against the yen, which saw its net long position cut by 48k contracts, or around $3.9 billion.

The dollar's resurgence was also reflected in its performance against other major currencies. The euro and sterling positions were both cut, while the New Zealand dollar recorded its largest weekly sale since 2018, despite a rate hike from the Reserve Bank of New Zealand to 2.75%.

In commodities, hedge funds reduced their exposure across most sectors, led by a 64.5k-contract reduction in Brent crude as improving Middle East flows eased some supply concerns. However, copper and soybean meal bucked the trend, with copper's net long position jumping 26% to a 5½-year high of 82.6k contracts.