According to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC), large currency speculators in the US dollar futures market continue to reduce their positions. The non-commercial futures contracts of US dollar index futures, traded by large speculators and hedge funds, totaled a net long position of 18,682 contracts in the data reported through August 25, 2026. This represents a decrease of 397 net positions compared to the previous week, indicating sustained selling pressure among institutional traders. However, recent data shows that aggregate net-long exposure among futures traders stood at $26.3 billion on Tuesday, ahead of the Jackson Hole speech, with dollar longs holding firm despite the overall decline.
The continued decline in speculative long positions suggests that institutional traders are becoming more cautious about the US dollar's near-term prospects. The net long position of 18,682 contracts represents a significant reduction from previous levels, indicating that large speculators are either closing existing positions or reducing their exposure to the US dollar. Recent market analysis reveals that short interest did not pick up in US dollar index futures markets, either among large speculators or managed funds, with gross longs remaining relatively firm overall. This positioning shift comes as the dollar faces various market pressures that are prompting traders to reassess their currency strategies.
The Japanese yen has broken above 160 per dollar again, with 161 per dollar identified as the first threshold for potential intervention if the yen's decline accelerates further. According to Bloomberg reports, a move into the 162 to 163 range would further raise the odds of official action. Japanese Finance Minister Satsuki Katayama and U.S. Treasury Secretary Scott Bessent have signaled they could take additional action if needed, with authorities consistently stating that the key trigger for intervention is not a particular exchange rate but the speed and disorder of the yen's moves. Japan spent a record $96.4 billion over the past month to support the currency, with the U.S. joining the effort in late July for the first joint U.S.-Japan yen-buying intervention since 1998. The Dollar Index (DXY) rose 0.90 to 99.70, with USD/JPY closing at 160.09, reflecting the dollar's broader strength against major currencies.
The stronger US dollar is creating additional pressure on oil markets through multiple channels. Brent crude fell more than 5% for the week, with October Brent futures settling at $89.31 per barrel on Friday, while WTI declined by over 4%. International crude oil is primarily priced in US dollars, making oil more expensive for importing countries using euros, yen, renminbi, or other currencies. Fed Chair Kevin Warsh's hawkish remarks at Jackson Hole have raised expectations for further rate hikes, with markets now pricing in a 90% chance of a benchmark rate increase at the BOJ's September 18 meeting. Higher rates could weaken economic growth and energy demand, affecting corporate investment, consumer spending, and manufacturing activity that would shape expectations for oil demand.
This week's ISM and NFP reports will help determine how much further the USD rebound can extend by Friday's close. The hawkish tone delivered at Jackson Hole has driven a rebound in the dollar, putting pressure on several major FX pairs. Market analysts note that around two-thirds of economists expect a 25bp hike from the BOJ at its next meeting, with money markets effectively pricing in the move. In the swaps market, traders assign about a 90% chance to a benchmark rate increase at the BOJ's September 18 monetary policy meeting, with a hike fully priced in by October 30. The RBNZ is in a clear hawkish phase, with markets betting on a 25bp hike in September and another 25bp by December, suggesting that pullbacks in AUD/USD and NZD/USD may be limited despite renewed Fed hike bets.
