Hedge funds and asset managers have turned bearish on the US dollar for the first time since Donald Trump’s election victory last year, marking a significant shift in market sentiment, according to report by Business Times.
The report cites data from the Commodity Futures Trading Commission (CFTC) as showing that speculative traders held $932m in net short positions on the dollar as of 18 March – an abrupt reversal from mid-January, when they had amassed $34bn in long-dollar bets.
The shift reflects growing concerns over the impact of Trump’s economic policies, Federal Reserve rate expectations, and broader uncertainty surrounding the US economy. Market confidence in a stronger dollar at the start of 2025 has given way to apprehension over potential trade wars, public sector job cuts, and restrictive immigration policies.
At the start of the year, many hedge funds and investment strategists had forecast a strong dollar, expecting Trump’s policies and a limited number of Federal Reserve rate cuts to support the currency. However, growing concerns about economic fragility have reinforced expectations for at least three Fed rate reductions by early 2026. While the Bloomberg Dollar Spot Index saw a slight uptick last week, it remains on track for its worst monthly performance since late 2023.
Deutsche Bank strategists noted in a 19 March report that Trump’s trade policies, once viewed as a bullish catalyst for the dollar, are losing their perceived strength. Meanwhile, Credit Agricole revised its dollar forecast downward, citing the underestimation of how a US-led global trade war, public sector layoffs, and immigration restrictions would weigh on growth.
