On Monday, the American Dollar rose against a basket of major currencies on an average as a number of investors appeared to have changed their recent short positions following the American currency’s steepest monthly plunge in a decade.
In point of fact, market participants’ net short position on the US Dollar had soared to their highest level since August 2011 to $24.27 billion, while the US Dollar index (DXY) was last up by 0.5 per cent to 93.83.
Aside from that, Monday’s gains of the American dollar index (DXY) came against the backdrop of a more than 4 per cent decline last month, remarking the index’s largest monthly drop since the September of 2010.
However, analysts had widely seen the July weakness for the US Dollar as a repercussion regarding broad-based market optimism over further easing of monetary policy alongside a lack of agreement among the policymakers over a second round of pandemic relief bill.
Anti-Dollar sentiment was overdone, suggest analysts
Besides, despite a robust opening of the day, the US Dollar had pared some of its intra-session gains at late European trading following release of another set of bleaker-than-anticipated US economic data including a decline in construction spending to a one-year low in June.
Citing statistics, during preparation of this report, at late European trading on Monday, GMT. 17.05, the American Dollar had added 0.4 per cent against the safe-haven Japanese Yen to storm past the technical resistance level of 106 yen-per-dollar, while the bloc’s common currency was last trading 0.4 per cent down against its American peer to $1.1727.
Meanwhile, as the day’s gain appeared to be closely tied to the investors’ move towards leaving a short-selling position for the American currency, a chief market strategist at Bannockburn Global Forex, Marc Chandler said on the day’s European market closure, “Sentiment was overdone.
The swing in the pendulum of market sentiment hit such an extreme which allowed for some unwinding of those short positions. I don’t expect it to last long. ”