Speculators' net long dollar position fell to its lowest in more than a year, according to calculations by Reuters and US Commodity Futures Trading Commission data released on Friday. The value of the net long dollar position was $13.327 billion in the week ended August 20, compared with $16.7 billion in the previous week. This week's net long dollar position was the smallest since early July 2018, falling for a third straight week.

In a wider measure of dollar positioning that includes net contracts on the New Zealand dollar, Mexican peso, Brazilian real and Russian ruble, the greenback posted a net long position of $10.9 billion in the week ended August 20, compared with $12.31 billion the previous week.

The dollar was pressured all week by the continued slide in US Treasury yields and the subsequent inversion in the yield curve, a scenario some analysts believe presages a recession.

So far this month, the dollar has weakened by 0.8% against a basket of six major currencies. The dollar was further pummeled on Friday after a series of tweets from President Donald Trump that further escalated trade tensions between the United States and China.

Philip Marey, senior US strategist, at Rabobank said by increasing friction with China, Trump will get what he wants and that is: force the Fed to cut interest rates. "There is now a strong feedback loop between trade policy and monetary policy that will force the FOMC to make more insurance cuts in the coming months, most likely in September and October," said Marey.

Copyright Reuters, 2019