Foreign Investors Cutting Dollar Exposure as Fiscal Concerns Grow – BofA

Foreign Investors Pull Back From Dollar as U.S. Fiscal Concerns Mount – BofA Survey

Foreign investors are beginning to scale back their exposure to the U.S. dollar, according to Bank of America’s latest May 2025 Forex and Rates Sentiment Survey. The shift is largely driven by growing unease over the U.S. fiscal outlook, with concerns about rising government debt and deficits weighing on investor sentiment.

BofA reports that “selling the dollar” has now become the highest conviction trade for the first time in 2025, overtaking previous top strategies such as buying government bonds. This marks a significant shift in sentiment among institutional clients, signaling broader skepticism about the dollar’s near-term prospects.

The euro appears to be one of the main beneficiaries of this trend. As dollar demand declines, the euro has made modest gains, last trading at $1.1254, up 0.2% on the day. However, it still remains well below its April 21 high of $1.1574.

Bank of America strategists suggest that if fiscal uncertainty in the U.S. persists or worsens, dollar weakness could accelerate, giving further support to rival currencies. The results underscore a broader realignment in global currency markets, where confidence in traditional safe-haven assets like the dollar is no longer as firm.