“The U.S. currency slid against all of its major peers last week, coming under pressure as inflation and retail sales data missed expectations. The dollar’s chances of rising against the euro by year-end have plunged to 4 percent, compared with about 40 percent in January, options markets imply,” according to Bloomberg. “Options traders see plenty of upside for the euro: The total notional amount of large euro calls bought last week was about seven times the tally for euro puts, according to DTCC data.”
The U.S. dollar moved sharply higher against the world’s major currencies in 2014 and 2015 — creating a strong dollar environment in the truest sense of the term. US investors experienced the results of a stronger dollar in the form of tepid economic and profit growth, and muted inflation.
Despite persistent media headlines to the contrary, the currency backdrop has been more nuanced since early 2016. Indeed, the U.S. dollar, as measured by the Bloomberg Dollar Index, traded in negative territory from mid-February through mid-November 2016, not reaching positive territory until after the November US elections.
“Hedge funds and other speculators boosted net-short bets on the dollar last week to the most since February 2013, data from the Commodity Futures Trading Commission show,” according to Bloomberg.
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