October 7, 2016 / 8:56 PM / in 10 months

Dollar net longs hit 2-month high; pound shorts at record high -CFTC, Reuters

NEW YORK (Reuters) - Speculators lifted favourable dollar bets for a second straight week, with net longs hitting their highest in roughly two months, as investors priced in an interest rate hike by the Federal Reserve after the release of upbeat U.S. data this week.

The value of the dollar's net long position rose to $10.52 billion in the week ended Oct. 4 from $9.71 billion the previous week, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday. This was the highest since the week of August 9.

The dollar has garnered support from recent U.S. reports that showed strength in manufacturing and a rise in consumer confidence.

Friday's U.S. non-farm payrolls report for September was slightly weaker-than-expected, but it was viewed as strong enough to keep the Fed on track to raise rates in December.

So far this year, the dollar index was still down 2.1 percent on Friday after gains of more than 9 percent in 2015.

"The combination of strong underlying inflationary pressures and waning oil price base effects means the Fed could find itself significantly behind the curve at the turn of the year – so much so that there may be upside risks to the current dot-plot projection of three hikes by end-2017," said Viraj Patel, FX strategist at ING Wholesale Banking in London.

Patel said the prospect for more rate hikes next year should keep the dollar supported against low-yielding G10 currencies in the near term.

Sterling net short positions hit another record high of 97,572 contracts, data showed.

Friday's flash crash which pushed sterling to another 31-year low was yet another reminder of the British currency's vulnerability.

The pound plunged on growing worries Britain would opt for a "hard" exit from the European Union. Sterling so far this year has lost nearly 19 percent of its value.

"It is important to note that the big picture has been sterling negative for many months when viewed from the (flows) perspective of global money managers," said Samarjit Shankar, global markets strategist, at BNY Mellon in Boston.

"We have been highlighting the steady outflows from the beleaguered currency over the past year."

The Reuters calculation for the aggregate U.S. dollar position is derived from net positions of International Monetary Market speculators in the yen, euro, sterling, Swiss franc and Canadian and Australian dollars.

Japanese Yen (Contracts of 12,500,000 yen)

$-8.346 billion

04 Oct 2016 Prior week

week

Long 101,986 97,432

Short 33,291 28,540

Net 68,695 68,892

EURO (Contracts of 125,000 euros)

$11.49 billion

04 Oct 2016 Prior week

week

Long 105,634 100,492

Short 187,693 176,522

Net -82,059 -76,030

POUND STERLING (Contracts of 62,500 pounds sterling)

$7.761 billion

04 Oct 2016 Prior week

week

Long 56,760 48,177

Short 154,332 135,891

Net -97,572 -87,714

SWISS FRANC (Contracts of 125,000 Swiss francs)

$0.375 billion

04 Oct 2016 Prior week

week

Long 19,293 12,803

Short 22,229 18,759

Net -2,936 -5,956

CANADIAN DOLLAR (Contracts of 100,000 Canadian dollars)

$1.067 billion

04 Oct 2016 Prior week

week

Long 32,585 34,579

Short 46,662 46,194

Net -14,077 -11,615

AUSTRALIAN DOLLAR (Contracts of 100,000 Aussie dollars)

$-1.824 billion

04 Oct 2016 Prior week

week

Long 73,545 62,892

Short 49,607 47,884

Net 23,938 15,008

MEXICAN PESO (Contracts of 500,000 pesos)

$2.223 billion

04 Oct 2016 Prior week

week

Long 22,358 24,865

Short 108,250 110,738

Net -85,892 -85,873

NEW ZEALAND DOLLAR (Contracts of 100,000 New Zealand dollars)

$0.564 billion

04 Oct 2016 Prior week

week

Long 32,224 34,159

Short 40,054 40,952

Net -7,830 -6,793

Reporting by Gertrude Chavez-Dreyfuss; Editing by Meredith Mazzilli and Richard Chang

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