Dollar bets show trend shift to bullish (Bloomberg) (12-05-2008)

May 12 (Bloomberg) -- The difference in the number of hedge fund and other large trader bets, reflect a switch in the trend of the dollar as futures are turning bullish for the first time in two and a half years.

The Dollar Index traded on ICE Futures in New York, which tracks the currency against six trading partners, is up 3.7 percent from an all-time low of 70.698 set on March 17.

The Dollar Index rose 0.3 percent today to 73.280 at 1:18 p.m. in Tokyo. The dollar has recovered 3.9 percent to $1.5425 since dropping to $1.6019 per euro on April 22 while a median estimate of 40 strategists surveyed by Bloomberg believe the U.S. currency will strengthen to $1.50 by the end of the year.

As far as the euro is concerned, the slide in business confidence in Germany and France, keeps speculation alive on a rate reduction in Europe this year. An end to lower rates in the U.S. and the possibility of cuts in Europe raises the appeal of dollar-denominated assets.

Interest-rate futures on the Chicago Board of Trade show an 82 percent chance the Fed will keep its target unchanged at 2 percent when policy makers next meet on June 25, with the balance of the odds calling for a quarter-percentage point cut.

The ECB will lower its 4 percent main refinancing rate to 3.75 percent by the end of September and 3.50 percent by year- end, according to the median estimate of 31 economists surveyed by Bloomberg.

  Source Bloomberg