Hedge Funds Cut Dollar Longs Amid COT Report

Hedge funds and speculators cut their aggregate dollar long by $8.3 billion to $27.6 billion in the week ending August 25, driven largely by short covering in major currencies such as the euro, Canadian dollar, Swiss franc, and New Zealand dollar.

The dollar's weakness after the US Treasury's bond buyback announcement initially led to a sharp reversal of its record-long position from just one month earlier. However, the Bloomberg Dollar Spot Index recovered its losses by last Friday following Kevin Warsh's hawkish speech at Jackson Hole.

Speculators reduced their net shorts in sterling and the Australian dollar but continued to hold net long positions in the Mexican peso due to favorable rate differentials.