JPMorgan highlighted the changing dynamics of the currency market, noting the dollar depreciated in May after a period of significant long positions in delayed April.

The bank’s analysis shows that currency-only hedge funds took a more modest stance on the dollar in April compared to January, based on the positive beta between the HFRI Currency Hedge Fund monthly index and the JPM USD tradable index.

The report found that while long dollar positions were less pronounced among currency-specific hedge funds in April, the broader group of macro managers maintained a heavier long dollar base at the end of the month.

This assessment was based on data from the Commodity Futures Trading Commission (CFTC), with a focus on the not-for-profit category, which covers a broader range of macro managers beyond just currency hedge funds.

According to the bank, the significant dollar long positions observed in CFTC data were only partially resolved in May. The unwinding of these positions likely contributed to the depreciation of the dollar during the month.

JPMorgan’s analysis also found that systematic funds such as Commodity Trading Advisors (CTA) may have contributed to the previously weighty long dollar base, as indicated by their momentum-based framework.

The reduction of long dollar positions comes after a period of sturdy positioning in favor of the US currency.

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