Hedge funds are moving toward betting against the U.S. dollar, as negative expectations surrounding it are increasing. The possibility of resumed talks between the United States and Iran and reaching a peace agreement is weakening the momentum that the greenback had been benefiting from during the war period.
A trading model issued by Morgan Stanley showed that investors increased their short positions on the dollar during April, while data from Goldman Sachs indicated that the dollar’s tactical positioning has shifted from more optimistic levels seen a year ago to levels closer to neutral.
Ivan Stamenovich, Head of FX Trading at Bank of America, also told Bloomberg that hedge funds are taking advantage of the current volatility to offload the dollar, selling into rallies rather than buying on dips.
Morgan Stanley analysts noted that the path of the dollar’s decline is beginning to broaden, expecting that a ceasefire would support higher-risk currencies in the short term, while the dollar may continue to weaken against major currencies such as the euro and the yen over the medium term.
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