(Bloomberg) -- Speculative currency traders bolstered wagers for an even stronger US dollar in the leadup to President-elect Donald Trump’s return to the White House.
Derivative traders held the equivalent of roughly $34.6 billion in total bets that stand to benefit from further gains in the dollar as of Jan. 14, a nearly $1 billion increase from the week prior, according to the latest Commodity Futures Trading Commission data released on Friday and aggregated by Bloomberg. That’s the most since 2019.
“They’re looking for opportunities to buy,” Kathy Lien, a veteran currency trader and managing director at BK Asset Management, said in an interview ahead of the data’s release. Trump’s policy vows are “dictating the overall bias of traders.”
Since Trump’s presidential victory, both bullish wagers on the dollar and the dollar’s value itself have risen. The Bloomberg Dollar Spot Index has climbed about 5% since the election on the potential for tariffs and inflationary policies under Trump, as well as doubt on future Federal Reserve interest-rate cuts this year.
Long dollar bets have been matched by a surge in short wagers against currencies including the Canadian dollar and euro, the CFTC data show. Non-commercial traders held some $11.6 billion in bearish positions against the loonie as of Jan. 14, the most among Group-of-10 currencies tracked by the CFTC. That group of traders is short the euro by around $7.8 billion, according to the data.
Of course, that raises the likelihood of a snapback in positioning should the Trump administration act less aggressively than expected on tariffs in the first weeks of the new term.
“Positioning is now seen as the biggest US dollar headwind, which is a concern we share,” wrote Bank of America currency strategists including Adarsh Sinha and Michalis Rousakis in a Friday report to clients. “US dollar longs stand out versus history and more so versus the past year.”
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