JPMorgan highlighted the shift in currency market dynamics, noting a decline in the value of the dollar in May after a period of large long positions at the end of April.
The bank's analysis indicated that currency-only hedge funds had a more modest stance on the dollar in April compared to January, based on the positive beta between the monthly HFRI currency hedge fund index and the JPM USD tradable index.
The report noted that while long dollar positions were less pronounced in April among currency-specific hedge funds, a broad range of macro managers maintained a heavier dollar base at the end of the month.
This assessment has been derived from data from the Commodity Futures Trading Commission (CFTC), with a particular focus on the non-trading category, which includes a broad range of macro managers beyond just currency hedge funds.
According to the bank, the large long dollar positions observed in CFTC data only partially unraveled in May. It is possible that the unwinding of these positions contributed to the decline in the value of the dollar during the month.
JPMorgan's analysis also noted that systematic funds, such as Commodity Trading Advisors (CTAs), may have contributed to the previously heavy dollar long base, as evidenced by their momentum-based framework.
The decline in dollar buying deals comes after a period of strong positions in favor of the US currency.
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