JPMorgan highlighted a shift in currency market dynamics, noting a depreciation of the dollar in May after a period of significant long positions at the end of April.
The bank's analysis suggested that currency-only hedge funds had a more modest long dollar stance in April compared to January, based on the positive beta between the monthly HFRI Currency Hedge Fund index and the JPM USD tradeable index.
The report indicated that while the long dollar positions were less pronounced in April among currency-specific hedge funds, a broader range of macro managers maintained a heavier long-dollar base at the end of the month.
This assessment was derived from the Commodity Futures Trading Commission (CFTC) data, particularly focusing on the non-commercial category, which encompasses a wider array of macro managers beyond just currency hedge funds.
According to the bank, the substantial long-dollar positions observed in the CFTC data had only partially unwound in May. The unwinding of these positions likely contributed to the dollar's depreciation during the month.
JPMorgan's analysis also pointed out that systematic funds, such as Commodity Trading Advisors (CTAs), might have contributed to the previously heavy long-dollar base, as indicated by their momentum-based framework.
The reduction in dollar longs comes after a period of strong positioning in favor of the U.S. currency.
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