Dollar weakness remains top trade conviction, BofA survey shows
The U.S. dollar remains the highest conviction short trade for the remainder of 2024, according to Bank of America’s latest investor survey released Thursday.
The bearish dollar outlook matches respondents’ expectations of declining U.S. economic exceptionalism and ongoing concerns about Federal Reserve independence and U.S. fiscal policy. Survey participants indicated a preference for increasing their foreign exchange hedge ratios, while positioning in dollar shorts appears relatively light.
Euro bullishness continues to show resilience in the survey, with minimal impact from respondents’ low expectations for broad European investment initiatives. The survey noted slightly reduced hopes for EU defense spending increases and a perception that German fiscal stimulus measures are already well-priced into markets.
The short dollar thesis could face challenges if concerns about a global growth slowdown materialize, with this possibility emerging as a subtle theme in the latest survey results. A significant 37% of participants view long-risk positions as the most crowded trade currently in markets.
Both long interest rates and short-risk positions gained popularity as high-conviction trades for the remainder of the year, reflecting growing caution among survey respondents about broader market conditions despite the persistent bearish dollar sentiment.
Source: Investing.com
