(Bloomberg) - With an epic rally in the U.S. stock and recession calls over the week, currency traders were as bearish on the dollar as ever.
Most of them come from Bloomberg
JPMorgan Chase & Co (JPM) strategist. Deutsche Bank Ag (DB) said the currency will continue to weaken, and the sentiment among option traders is the most negative in five years. The dollar index (^nyicdx) remains close to its April lows, with evidence that investors are wary of returning despite eased other markets in China’s trade tensions.
It's a turbulent journey, with Greenguard falling more than 6% against a basket of currencies in 2025, and by far the worst year in Bloomberg data goes back to twenty years. According to many, U.S. policies remain unstable and unpredictable, and the attractiveness of currencies has been reduced as the Fed is committed to waiting and seeing. Despite Washington's denial, some investors still doubt the Trump administration wants to support U.S. manufacturing bases with a weaker dollar.
"The combination of lower growth, inflation and even neutral Fed and the ongoing U.S. policy uncertainty should keep the dollar in script," said Kristina Campmany, senior portfolio manager at Invesco. "We continue to believe that the dollar decline has just begun, given the US dollar decline that is owned by the rest of the world, especially the large number of stocks in stocks, is being considered."
Bets at the highest level of the dollar have fallen next year since 2020. These long-term options are often used by currency managers rather than short-term speculators, strengthening the argument that a broader reassessment of US dollar exposure is conducted.
“Our exceptionalism is gradually eroding, and these actions are running longer,” Kamakshya Trivedi, global head of currency at Goldman Sachs Group Inc., said on Bloomberg TV this week.
Stock investors fail to burn, pay more dollars to suffer
Meanwhile, the S&P 500 rose more than 5% last week as Donald Trump's optimism about technology trading and inflation data were conquered by the president in the Middle East. U.S. equity funds attracted about $19.8 billion in the week from this week to May 14, the first inflow in five weeks, according to a note from Bank of America.
While the dollar rose 1% on Monday after news that China and the U.S. agreed to temporarily cut tariffs, it lost most of its gains later this week. Still, Bloomberg’s Green Guard instrument on Friday was a second week advance.
For Jitania Kandhari, deputy chief investment officer of Morgan Stanley Investment Management, the dollar recovery early this week was a rally against the trend, and Greenback still has enough room to depreciate 6%.
“We used to be American excellence, and that would be a multi-year trend,” Kandari, who is also a portfolio manager, said in an interview.
Hedge fund insiders think Dollar Rout is the biggest player's eye exit
George Saravelos, head of global monetary strategy at Deutsche Bank, pointed out that inflows of assets entering the United States have slowed down, while countries such as Taiwan require banks to review risk management plans for their U.S. investment. All of this shows that buying treasury is small, which is the safest investment in the world.
Savelos said the most obvious sign would be a further decoupling of U.S. yields and the dollar. Given that Japan is traditionally one of the largest investors in U.S. fixed income, and those who slow down in buying will have weight, this will involve the dollar falling on the yen, while Treasury earnings climb.
How much does the dollar mean to the economy: QuickTake
A short-term green case is still intact, said strategists at JPMorgan. The U.S.’s soft stance on tariffs will support economic growth in the rest of the world, thereby boosting its currency, teams including Meera Chandan wrote.
According to Mark Nash of Jupiter Asset Management, investors are looking for countries that have a dollar holding and then have a green holding of local currencies. The Koreans won, and Indonesian Rubya were two that stood out in him.
“Asia is now at the forefront of the global repatriation theme,” he said. “Investors are withdrawing their capital from the United States.”
According to the latest data from the Commodity Futures Trading Commission, traders in speculative derivatives markets have remained the least likely to be the dollar since September. They hold about $16.5 billion in positions related to future greenback losses until May 13 figures showed a slight reduction in short bets compared to the previous week.
- With the assistance of Vassilis Karamanis, Ruth Carson and Zijia Song.
(Updated price, added CFTC data and investor comments.)
Most of them come from Bloomberg Business Weekly
©2025 Bloomberg LP