Global investors are turning sharply against the U.S. dollar.

The latest Global Fund Manager Survey from Bank of America shows that bearish positioning on the dollar has dropped to its lowest level since 2012. In effect, major asset managers are now heavily underweight the greenback, with many increasing bets that it will weaken further.

This marks a significant shift for the world’s dominant reserve currency.

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Why Sentiment Shifted

The move comes as markets anticipate potential rate cuts from the Federal Reserve, which could reduce the yield advantage that previously supported the dollar. For much of the past two years, higher U.S. interest rates attracted global capital flows into dollar-denominated assets. That dynamic may now be fading.

At the same time, growth expectations in the U.S. appear to be moderating while other regions show signs of relative improvement. This has encouraged investors to diversify away from the dollar.

The U.S. Dollar Index (DXY), which measures the dollar against a basket of major currencies, has softened in recent months, reinforcing the bearish outlook.

Back in 2012, investor sentiment toward the dollar was similarly weak. However, the context was very different due to:

  • Aggressive monetary stimulus following the 2008 financial crisis

  • Europe’s sovereign debt crisis intensified driving global capital back into the U.S seeking safety

  • The Federal Reserve signal to begin tapering asset purchases staged a sustained dollar recovery

Today’s environment shares one key similarity with 2012: expectations of easier monetary policy.

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A weaker dollar can make U.S. exports more competitive but may also increase import costs. More importantly, extreme positioning raises the risk of volatility. When sentiment becomes this one-sided, even modest economic surprises can trigger sharp reversals.

For now, fund managers appear convinced that the dollar’s strong cycle has peaked. Whether this proves to be a temporary pullback or the start of a longer-term shift will depend on upcoming economic data and the Federal Reserve’s policy direction.

One thing is clear: investor confidence in the dollar has not looked this fragile in over a decade.

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