Goldman Axes Call Short Dollar Call as US yields spoil the bet


Photographer: Michael Nagle / Bloomberg

Almost six months after Goldman Sachs Group Inc. recommended shorten the dollar, is to end the trade.

In a note titled “Tactical Withdrawal”, Goldman’s currency team closed its recommended short position in dollars against a basket of currencies from the Group of 10 Commodities, including Australian and New Zealand dollars. The firm joins hedge funds and others Investors capitulated on bearish bets on the dollar after rising Treasury yields triggered a rally in the greenback, overturning one of the busiest macroeconomic trades in the world.

“While we still expect these currencies to appreciate against the dollar over the next few quarters, strong US growth and rising bond yields may keep the dollar supported in the near term,” strategists such as Zach Pandl wrote in a note friday. “After a hectic few months, we are closing our recommended dollar short trade.”

Traders hedged about $ 25 billion in short dollar positions since late January.

What was a The near consensus call at the end of last year has been undone due to the economic improvement The data and an 80 basis point rise in 10-year Treasury yields boosted the dollar’s appeal relative to its peers. The Bloomberg Dollar Spot Index is up nearly 3% this year.

Since October 9, when Goldman strategists issued a brief recommendation on the dollar against two baskets of developed and emerging currencies, the dollar indicator has fallen about 1%.

The operation would have made a profit of 5% since its inception, although it has been “roughly flat” since the beginning of the year, the strategists wrote.

Read more: Macro traders don’t give a damn about dollar collapse fears

Still, opportunities to short the U.S. currency may resurface as the pandemic situation improves in Europe, the Goldman team said. You see the euro rise by around 3% over the next three months to the $ 1.21 level, before testing $ 1.28 in one year.

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