Dollar Nears Four-Year Low
Fund Managers Cut Exposure and Bet on Further Weakness
Due to the unpredictable policies of the administration of U.S. President Donald Trump, global fund managers' sentiment toward dollar investments has deteriorated to its most pessimistic level in 14 years.
Donald Trump, President of the United States. Presidential Office Communications Photo Pool, Yonhap News
According to the Financial Times (FT) on the 16th (local time), the value of the dollar fell 9% last year and has declined a further 1.3% this year against major currencies, approaching its lowest level in four years.
A survey by Bank of America (BoA) found that fund managers' dollar exposure has dropped below the levels seen during last year's "mutual tariffs" turmoil, marking the most negative reading since related data began to be compiled in 2012.
Options data from the Chicago Mercantile Exchange (CME) also show that bets on a weaker dollar have overtaken bullish positions, a reversal from the trend in the fourth quarter of last year. This is seen as a result of major institutional investors, including pension funds, reducing the share of dollar assets or seeking to diversify risk in anticipation of dollar weakness.
This anxiety stems from President Trump's aggressive foreign policy and his pressure on the Federal Reserve (Fed). In a recent interview, President Trump openly pressured Kevin Warsh, his nominee for Fed chair, by pointing to his past record of raising interest rates.
BoA analysts concluded that Warsh's nomination has failed to restore market optimism. In particular, President Trump's recent declaration on the annexation of Greenland and his threats of military action and additional tariffs against NATO allies have become decisive triggers for global investors to pull money out of U.S. assets.
Treasury Secretary Scott Bessent has denied concerns over capital outflows, but market experts judge that remittance flows by overseas dollar holders sending funds back to their home countries are already increasing. According to the FT, Caroline Houdreill, a multi-asset fund manager at asset management firm Schroders, said, "We are seeing an increase in remittance flows as overseas dollar holders repatriate capital into their home currencies."
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