Goldman Axes Short Dollar Call, while the US produces a spoil bet

Photographer: Michael Nagle / Bloomberg

Almost six months after the recommendation of Goldman Sachs Group Inc. short-circuiting the dollar cancels the transaction.

In a note titled “Tactical Withdrawal”, Goldman’s currency team closed its recommended short position of the green dollar against a basket of 10-commodity commodities, including the Australian and New Zealand dollars. The company joins hedge funds and others Investors in capitulating to low dollar bets after rising Treasury yields triggered a return to the US currency, overturning one of the busiest macro transactions in the world.

“While we still expect these currencies to appreciate against the dollar in the coming quarters, strong US growth and rising bond yields could keep the dollar green in the short term,” strategists including Zach Pandl wrote on Friday. “After a few hectic months, we close the recommended short transaction in dollars.”

What was a the almost consensual appeal at the end of last year was canceled as an economic improvement the data and the increase by 80 basis points of the 10-year Treasury yields stimulated the attraction of the dollar towards colleagues. The Bloomberg Dollar Spot index rose nearly 3% this year.

As of October 9 – the date when Goldman strategists issued a brief recommendation on the green currency against two baskets of developed and emerging currencies – the dollar’s size fell by about 1%.

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

Read more: Macro traders could not care less about fears of falling dollar

However, opportunities to reduce the US currency may resurface as Europe’s pandemic situation improves, the Goldman team said. He sees the euro gain about 3% over the next three months to $ 1.21, before testing $ 1.28 a year.