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Dollar bandwagon starting to get a little crowded

A currency trader counts US 100-dollar notes.
Ali Mohammadi | Bloomberg | Getty Images

No question, the U.S. dollar is the trade du jour.

Investors are betting on the buck for good reason: The U.S. economy is outperforming other global economies, and the Federal Reserve is moving closer to raising interest rates. At the same time, other central banks in Europe and Japan are moving in the opposite direction, easing policy to fight both deflation and slow growth.

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That divergence in central bank policies has resulted in a $46 billion bullish trade on the dollar.

In fact, hedge funds and other large speculators are betting the dollar will strengthen against all major currencies, according to the latest weekly Commodity Futures Trading Commission report on futures positions. Traders have been increasing bullish dollar positions steadily since mid-May.

The enthusiasm is shared by forecasters as well.