Those short dollars may be squeezed
Oct 7 (Reuters) -Those short dollars may be squeezed as the likelihood of the cycle of U.S. interest rate cuts they depend on lessens due to the rapid rise in the price of oil.
Brent crude oil has shot higher by around $10/bbl this month implying there is more inflation in the pipeline to derail the likelihood of the speedy easing cycle once envisaged.
The U.S. interest that was seen dropping toward 3% next summer before last week's strong jobs report is now eyed around 3.5% next October.
Higher oil prices will support inflation, which is above the U.S. central bank's target, and also benefits nations of producers such as the United States, while it will hurt nations that reply on imports.
Traders are betting against the dollar versus euro, pound and yen, all of which are currencies of importers, and traders are also betting the dollar drops against all nine of currencies in Reuters latest poll for Asia currencies. This includes China's yuan and India's rupee which are some of the biggest importers of crude oil.
To make matters worse the dollar index has rebounded following the failure to break last year's low. Bullish techs should discourage many traders currently short - many inspired by bearish techs - to pare risk. Breaks above the 55-DMA at 102.01 and into the daily Ichimoku cloud 101.90-103.32 hint at a bigger rise toward 103.14 or 103.85 (50% and 61.8% retracement of the drop resulting from expectations for U.S. easing).
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USD index https://tmsnrt.rs/4dwoGsM
Jeremy Boulton is a Reuters market analyst. The views expressed are his own; Editing by Alison Williams
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