Overview of Dollar Positioning#
A recent survey by Bank of America highlights a sharp recovery in U.S. dollar positioning as investors become more cautious due to geopolitical uncertainties and increasing risk-off sentiments. Conducted between March 6 and March 11, the survey involved 39 global fund managers managing a total of $632 billion in assets.
Geopolitical Tensions Impact Markets#
The survey indicates that ongoing geopolitical tensions have led to a decrease in confidence across various markets, prompting many investors to rethink their currency positions. Notably, the most common response for the highest-conviction trade this year was "Other/Don’t know," reflecting a general uncertainty among investors.
Shift in Currency Sentiment#
One significant trend observed is the decline in sentiment towards emerging market (EM) currencies in comparison to the U.S. dollar. This sentiment has dropped to levels not seen since April 2025. Conversely, the U.S. dollar has seen a rapid recovery in investor positioning, with long positions in the dollar becoming popular for the first time in months as investors seek to reduce their overall risk exposure.
Mixed Views on Future Developments#
Despite the shift in currency positioning, opinions on interest rates have remained relatively stable. Strategists note that there has been little change in duration exposure following recent geopolitical escalations. Investors appear cautious about adjusting their expectations for interest rates, even as overall risk sentiment declines. Additionally, many investors anticipate that the current conflict in the Middle East may persist for one to three months, with oil prices expected to average $90 per barrel or higher in the coming months.