Goldman Axes is a short call in dollars as a bet on US devastation

Photographer: Michael Nagle / Bloomberg

Almost six months after the recommendation of Goldman Sachs Group Inc. in the short term of the dollar, it is ceasing to function.

In a note titled “Tactical Withdrawal,” Goldman’s currency team closed its recommended short position against a basket of Commodity Group 10 commodities, including the Australian and New Zealand dollars. The firm joins hedge funds and others investors to capitulate on the bearish bets of the dollar after the rise in Treasury yields caused a rebound in the US currency, which overturned one of the busiest macro businesses in the world.

“While we still expect these currencies to appreciate against the dollar in the coming quarters, strong U.S. growth and rising bond yields may keep the greenback supported in the short term,” strategists wrote Friday, including Zach Pandl. “After a few hectic months, we are closing our recommended short trade in dollars.”

What was one the almost consensual call at the end of last year has been undone to improve the economy the data and an 80 basis point increase in ten-year Treasury yields increased the dollar’s ​​attractiveness relative to peers. The Spot Bloomberg Dollar index has jumped nearly 3% this year.

Since Oct. 9, when Goldman strategists issued a brief recommendation on the green dollar against two baskets of developed and emerging currencies, the value of the dollar has shrunk by about 1%.

The trade would have achieved a 5% gain since its inception, although it has been “roughly flat” since the beginning of the year, strategists wrote.

Read more: Macro traders couldn’t care less about fears of a weakening dollar

However, opportunities to reduce the U.S. currency may re-emerge as Europe’s pandemic situation improves, Goldman’s team said. He sees the euro gaining about 3% in the next three months to the $ 1.21 level, before testing $ 1.28 a year.