The global forex landscape is undergoing a significant recalibration as speculative traders aggressively unwind their long positions on the US Dollar. According to the latest Commitment of Traders (COT) data for the week ending August 4, 2026, hedge funds slashed their bullish dollar bets by a staggering $13 billion. This move represents the most substantial one-week reduction in six years, driven largely by shifting expectations surrounding the Federal Reserve and the Bank of Japan's recent policy maneuvers.
Yen Short Squeeze and Broad Reversal
The massive reduction in dollar exposure was dominated by a 72% collapse in yen short positions, as traders scrambled to cover their bets following a sharp reversal in currency trends. While the overall net long position for the dollar remains elevated at $37.3 billion, the broad-based selling across almost all major currency pairs suggests that the market is rapidly adjusting to a new reality. The euro also saw a significant reduction in net short positions, dropping by 20% as speculators sought to hedge against further dollar weakness.
Implications for Global Markets
This shift in positioning highlights the reactive nature of hedge funds and trend-following CTAs, who are often the first to amplify price changes triggered by fundamental shifts. As these institutional players adjust their portfolios, the resulting volatility is being felt across both forex and commodity markets. Traders are now closely watching to see if this trend of dollar selling continues or if the greenback will find support as the market digests the latest economic data.
— Ole S. Hansen, Global Head of Investment Strategy at Saxo
Key terms and figures: US Dollar Commitment of Traders Hedge Funds Yen Short $13 Billion
- Largest one-week reduction in six years.
- 72% reduction in yen net short positions.
- Euro net short reduced by 20%.
