Gold prices recover as fiscal concerns, US rate uncertainty drive haven demand
Investing.com - The reduction in U.S. dollar shorts has emerged as the primary theme of the fourth quarter, according to a Bank of America report released Monday.
The bank’s analysis shows investors have significantly pared back short positions against the dollar, particularly versus the euro, Australian dollar, Canadian dollar, and Japanese yen. Multiple indicators, including investor spot and forward flows, SDR FX options data, and the bank’s sentiment survey, confirm this positioning shift.
Official institutions have continued to provide support for the U.S. dollar through purchases, including activity observed last week. Despite recent budget-related volatility in the United Kingdom, the report notes that pound sterling flows have been relatively light, suggesting negative factors may already be priced into the currency.
Emerging market currency flows have shown mixed patterns, turning somewhat positive in Eastern Europe, Middle East, Africa, and Latin America regions while remaining negative in Asia. The report specifically highlights Korean won supply alongside South African rand and Colombian peso demand as notable trends.
Bank of America attributes the more balanced dollar sentiment to several factors, including risk constraints as year-end approaches, a lack of significant U.S. economic data releases, and deteriorating sentiment in markets outside the United States.
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