BUZZ-COMMENT-The big dollar short is a growing issue

Reuters09-09

Sept 9 (Reuters) - Traders almost doubled their bet against the dollar to over $17 billion in the week ending Sept 3. This big gamble will have a growing influence on the direction of the U.S. currency before and after the September meeting of the Federal Reserve which is expected to result in the first rate reduction of a new easing cycle.

Whatever the U.S. central bank does, traders are hoping it lowers the value of the dollar so they can buy. If the dollar does not drop, those betting on a slide are more likely to cover positions to avoid losing money.

In old trader parlance, positioning is everything, and if that is true then this bet will have material influence in the future.

Historically, bets larger than $25 billion are a fairly accurate indicator of a reversal. Excluding the residual $5 billion of a record $14 billion failed bet against Canada's dollar, traders are betting more than $22 billion against the greenback.

After plunging from 1.3945 on Aug 5 to 1.3441 on Aug 28 there is a strong chance that speculators continue to unwind bets against Canada's dollar, exacerbating the situation when the Federal Reserve makes its decision in 9 days' time.

For more click on

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Speculative FX positions

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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

((jeremy.boulton@thomsonreuters.com))

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If the dollar does not drop, those betting on a slide are more likely to cover positions to avoid losing money. </p><p>   In old trader parlance, positioning is everything, and if that is true then this bet will have material influence in the future.</p><p>   Historically, bets larger than $25 billion are a fairly accurate indicator of a reversal. 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