May 4 (Bloomberg) -- Hedge funds and other short-term speculative investors reversed their bets, indicating that they now believe that the Canadian dollar will gain against the U.S. dollar as confidence in the economy increased.
The Canadian dollar reached an eight-month high and posted seven straight weekly gains against its U.S. counterpart as signs of growth pushed traders to renew bets on a rise in the Bank of Canada's benchmark lending costs. A government report this week showed economic growth quickened in February for a fifth month.
The difference in the number of wagers on an advance in the Canadian dollar compared with those on a drop -- so-called net longs -- was 8,851 on May 1, compared with net shorts of 1,631 a week earlier, figures from the Washington-based Commodity Futures Trading Commission show. It was the first time the market had a net long for the currency since October.
The Canadian dollar advanced 0.8 percent to 90.31 U.S. cents at 4 p.m. in Toronto from 89.57 cents on April 27, the seventh straight weekly gain. It touched 90.64 cents earlier today, the highest since Sept. 1. One U.S. dollar buys C$1.1073.
The currency has rebounded from 84.20 cents on Feb. 8, the lowest since November 2005, pushing futures traders to unload net shorts on the Canadian currency from a record high of 84,906 on Jan. 12.
Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of Tuesday.
Each Friday the CFTC publishes aggregate numbers for long and short positions of speculators such as hedge funds and institutional investors that buy or sell futures to protect against price moves. Analysts and investors follow changes in the positions because such transactions can reflect an expectation of price changes.
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