FX Update- USD
The dollar rally ran out of steam following a good short squeeze in EUR/USD, which ran to 1.4964 highs. Some of the market focus once the noise died down turned to sovereign/central bank activity. Middle Eastern and Asian sovereign accounts have been heavily involved in the dollar upturn, along with long-term hedge funds, which have not been active for the last few years. The pick up in this interest reflected unhedged currency exposure being covered as growth outlooks deteriorated overseas. However, today’s session has seen spurious rumors of a U.S. presence in the dollar rally. Sources claim that the U.S. Exchange Stabilization Fund, used at the U.S. Treasury for FX intervention dropped by up to EUR 10 bln in recent weeks, which if proved would imply that the U.S. helped in the dollar rally. However, official figures aren’t reflecting this activity and there are no other sources willing to clarify the talk. “Perhaps some hopeful traders looking for further dollar gains”.