Goldman Axes Short Call on Dollar as US Reports Mess Bet

Photographer: Michael Nagle / Bloomberg

Almost six months after the recommendation of Goldman Sachs Group Inc. bypassing the dollar, he calls it stop on trade.

In a note titled “Tactical Pullback,” Goldman’s FX team closed its recommended short position in the greenback against a basket of Group 10 commodity currencies, including the Australian and New Zealand dollars. The firm joins hedge funds and others Investors capitulating to bearish bets on the dollar after surging Treasury yields triggered a rebound in the US dollar, capsizing one of the world’s most crowded macro transactions.

“While we still expect these currencies to appreciate against the dollar over the next few quarters, strong US growth and rising bond yields could keep the greenback strong in the near term,” said writes strategists on Friday including Zach Pandl in a note. “After a few hectic months, we are closing our recommended dollar short trade.”

what is a The near-consensus call at the end of last year was canceled because the improving economy the data and an 80 basis point surge in 10-year Treasury yields have made the dollar more attractive against its peers. The Bloomberg Dollar Spot Index has risen more than 2% this year.

Still, Goldman’s call was not a loser: the deal would have reported a gain of 5% since its inception, even though it has been “roughly stable” since the start of the year, have writes the strategists.

Read more: Macro traders don’t care less about dollar depreciation fears

Goldman is “still pretty bearish on the overall outlook for the dollar from both a cyclical and structural standpoint,” Pandl said Monday in an interview on Bloomberg TV. He added that the greenback is still expensive relative to its peers and that the recovery of the global economy and a growing US current account deficit could weigh on the currency in the longer term.