The Fed’s radically softer interest rate stance leads hedge funds and other currency traders to take short positions in the dollar.
This is reported by Bloomberg, noting that among others, Goldman Sachs anticipates further weakening of the dollar following the Federal Reserve’s clearest indications of interest rate cuts so far.
According to the news agency, Goldman Sachs has made “sweeping changes to its exchange rate forecasts” following the Fed’s statements last week about “non-recessionary” interest rate cuts, which triggered a stock market rally on Wall Street and in the stock markets of Asia and Europe.
Hedge funds and other currency speculators switched to a net short position against the dollar for the first time since September, according to data from the Commodity Futures Trading Commission referenced in the article.
The Bloomberg Dollar Spot Index fell by 1.2 percent last week to its lowest level in four months following the Fed’s announcement of a new pause in interest rates and the forecast of three rate cuts of 25 basis points each during 2024.