The dollar held steady within established trading ranges on Monday as investors who have recently bet heavily against the greenback digested the implications of weekend strikes on Syria by United States and its allies. Despite widening interest rate differentials in its favour and the widest yield gap between two-year U.S. and German debt for nearly three decades, the dollar's performance in recent months has been closely correlated to swings in risk appetite. A weaker dollar has broadly coincided with a pickup in demand for riskier assets and vice versa and the Syria strikes underlined that trend. "The military strikes were well telegraphed and we are seeing a continuation in the broad market theme from last week of a weaker dollar and favourable conditions for risk taking," said Credit Agricola (PA:CAGR) currency strategist Manuel Oliver. Against a broad basket of its rivals (DXY), the dollar was flat at 89.75. It has weakened 0.3 percent so far this month, taking its year-to-date losses to 2.5 percent extending a theme firmly in place since last year. Despite some jitters in emerging markets last week, notably currencies in Russia and Turkey, broad positioning on the dollar remained at multi-year highs. In a wider measure of dollar positioning that includes net contracts on the New Zealand dollar, Mexican peso, Brazilian real and Russian rouble, the U.S. dollar posted a net short position valued at $27.21 billion, its biggest since August 2011.
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