Investor Dollar Exposure Drops to 19-Year Low, Bank of America Survey Finds

Investor Exposure to the Dollar Hits 19-Year Low, Bank of America Survey Reveals

Investor exposure to the U.S. dollar has fallen to its lowest level in nearly two decades, according to Bank of America's latest global fund manager survey conducted in May. The survey found that only 17% of investors are currently underweight on the dollar, marking the highest percentage of such positioning since May 2006. This decline in exposure to the dollar comes amid shifting market expectations and growing concerns over the future strength of the U.S. currency.

The survey also uncovered that 40% of investors are actively looking to increase their hedges against a weaker dollar, signaling a growing sentiment that the greenback could face downward pressure in the coming months. This trend is reflected in investor attitudes toward the dollar's valuation. While 57% of respondents now view the dollar as overvalued, this percentage represents a significant drop of 12 percentage points from April's survey results. This marks the most substantial monthly decline since September 2023.

This shift in investor sentiment comes at a time when global financial markets are navigating various challenges, including inflationary pressures, shifting interest rate expectations, and geopolitical uncertainties. The findings highlight a notable change in how investors are positioning themselves regarding the U.S. dollar, reflecting broader concerns over its strength and sustainability in the face of these evolving risks.

The Bank of America survey, which is based on responses from a diverse group of institutional investors, also suggests that there is a growing divergence in expectations for the future path of the U.S. economy and its currency. While some investors remain cautious about the dollar's prospects, others are hedging their bets, anticipating that the U.S. dollar could experience volatility as global financial dynamics shift.