Dollar bearish bets continue rising after Fed meeting

Economic data were negative on balance during the week: sales of new as well as existing homes continued declining in August, and services sector activity expansion slowed in September. On the positive side manufacturing activity expansion speeded up but the uptick in manufacturing sector didn’t offset slowdown in service sector with composite PMI declining to 54.6 in September from 55.3 in August. Investors built net short dollar position notwithstanding Federal Reserve’s announcement it would start to shrink its balance sheet by $10 billion a month in October and signaled plans for another rate hike in 2017 and three more rate hikes in 2018. As is evident from the Sentiment table, sentiment improved for major currencies except for Japanese yen and Swiss franc. And British Pound joined the euro, Canadian and Australian dollars as the fourth major currency held net long against the US dollar.