Forex Signals - Dollar Finds Footing, but Appetite for Bearish Bets Persists

Forex Signals - Dollar Finds Footing, but Appetite for Bearish Bets Persists – The dollar rose from session lows Tuesday, as better-than-expected economic data stemmed downside momentum at a time when many expect the near-zero U.S. interest rates are likely to persist.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.20% to 92.32 after slipping to a 28-month low.

The move off the day's lows in the dollar comes despite ongoing dovish remarks from Federal Reserve members.

Federal Reserve Governor Lael Brainard on Tuesday said the central bank should adopt a more aggressive monetary policy approach to ensure a robust recovery in the labor market, and push inflation toward the 2% the target.

The comments drew a muted move in the dollar, which found its footing earlier in the day, following data showing the recovery in U.S. manufacturing remains on track.

The ISM Manufacturing Index improved to 56.0 from 54.2 in August, topping economists' forecasts for a reading of 54.5.

"Although there are some odd compositional issues within the data, overall they suggest the sector is continuing to pick up steam in its recovery," Jefferies (NYSE:JEF) said. " We remain confident that manufacturing will be more resilient to COVID-related developments than the service side of the economy, and activity should continue to expand in coming quarters as the recovery takes hold."

But the uptick in the greenback could be shortlived as recent findings point to ongoing investor appetite to raise bets against the dollar.

Bank of America (NYSE:BAC) said 36% of fund managers in a recent survey named shorting the dollar as their top currency trade for the second half of the year, Reuters reported.

The value of the net short dollar position increased to $33.68 billion in the week ended Aug. 25, compared with a net short of $31.56 billion the previous week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

A fall from euro, which makes up the bulk of the weighting the dollar index, also supported the dollar's recovery from session lows.

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