According to the weekly review by the Commodity Futures Trading Commission, hedge funds expect the US dollar, which is already down almost 9% in 2017, to continue its movement in the negative trend, Business Insider reports.
On the one hand It is good news for the U.S. stock market, which has gotten an unexpected boost from a weaker dollar in the form of enhanced profit growth.
On the other, it is a continuation of an unpredicted tendency, as anyone would expect that president Donald Trump's pro-growth agenda would push the dollar up, however the dollar's fortune reversed.
It is common knowledge that a weaker dollar makes exports more profitable, which especially supportive for companies doing business overseas, first and foremost the multinational conglomerates with big weightings in stock indexes.
"The positioning has roughly tracked the performance of the dollar, suggesting that trend followers may explain most of the positioning change in FX futures. If shorting the dollar truly is a crowded trade, a reversal in this trend could possibly spark a broader de-risking,” Pravit Chintawongvanich, the head of derivatives strategy at MRA, wrote in a client note.
Indeed, such strategy may not end well, especially amid concerns that the short-dollar trade is getting too crowded.