A growing number of investors, including hedge fund Mount Lucas Management, are increasingly positioning themselves against the US dollar as concerns mount over a cooling US economy and the potential fallout from a trade war, according to a report by the Straits Times.
Amid signs of economic slowdown and geopolitical uncertainty, the US dollar’s prospects are beginning to dim, prompting Mount Lucas, Invesco, and Columbia Threadneedle to shift their strategies.
While the US dollar saw a brief surge in late February following tariff threats from President Donald Trump, more investors are wagering on its decline believing the broader narrative beyond daily fluctuations surrounding the dollar is turning negative. With economic growth slowing and trade war fears intensifying, many anticipate that the dollar’s previous strength, buoyed by expectations of continued US economic outperformance, will fade.
Investors are particularly concerned about the rising uncertainty created by President Trump’s tariff policies, which, while briefly pushing the dollar higher, are seen as a longer-term risk to US economic stability. The fear is that these tariffs, aimed at boosting US manufacturing, could instead undermine growth, making the dollar less attractive. This shift in sentiment has led to an increase in market expectations for Federal Reserve interest rate cuts, further dampening the dollar’s appeal.
As David Aspell, Co-Chief Investment Officer at Mount Lucas Management, which manages $1.7bn, notes, the market had been pricing in the “positive side” of the US administration’s policies, but now it must account for the negative consequences as well. Mount Lucas has adjusted its positions, taking short bets on the dollar against other currencies like the Mexican peso and the British pound, betting that the post-election optimism around US growth has dissipated.
