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DOLLAR
DOLLAR: ### POV: Dollar's recent sell-off remains sharp on a historical basis
and the risk of a short-squeeze is rising.
* After funding requirements prompted volatility in EURUSD crosscurrency basis
swaps ahead of Christmas, the USD rallied on perceived funding demand from
institutions across Europe.
* This was quickly reversed post-Christmas with markets citing month-, quarter-
and year-end rebalancing as a catalyst for the sharp dollar sell-off.
* Crosscurrency basis swaps have now returned to 'normal' levels and usual
service should resume.
* MNI's FX Positioning Indicator suggests the market has become less bearish on
the greenback: the CFTC COT report shows speculators held a net long position
for the first time since July 2017 last week. This closing of successful short
positions could underpin the greenback in the coming weeks.
* Of the seven weeks since the beginning of 2016 the DXY fell this sharply, on
five occasions the dollar rallied in the following week and only twice did it
fall further.
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com

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