Speculative traders in the US$7.5-trillion-a-day currency market turned bearish on the US dollar for the first time since Donald Trump won the US presidential election last year.
Hedge funds, asset managers and other traders have amassed US$932 million worth of bets that the US dollar will weaken, according to Commodity Futures Trading Commission data for the week ended Mar 18.
That is a sharp reversal from mid-January, when the traders held US$34 billion worth of wagers on a stronger US dollar. It’s also the latest indication that Trump’s policies and questions about the US economy are denting – rather than boosting – the outlook for the world’s reserve currency.
“The Trump trade as we know it has been flipped upside down,” said Paresh Upadhyaya, director of fixed income and currency strategy at Amundi, US. “The chaotic, and messy rollout has led to uncertainty” and “changed market perception over its policy impact on the economy, inflation and monetary policy, from stimulative to contractionary”.
Many on Wall Street had gone into 2025 forecasting a stronger US dollar – at least in the first half of the year – thanks to the outlook for Trump’s policies and expectations for a limited number of Federal Reserve interest-rate cuts.
But angst surrounding the US economic path has reinforced the case for three rate reductions by January 2026. While the Bloomberg Dollar Spot Index ticked slightly higher last week, it’s poised for its worst monthly performance since late 2023.
Deutsche Bank strategists in a Mar 19 note said that the support previously expected for the US dollar on the back of Trump’s trade policy vows is already fading.
Strategists at Credit Agricole, meanwhile, cut their forecast, saying they “underestimated the extent to which the prospects for a US-led global trade war, together with public sector layoffs and immigration restrictions” would hurt US growth and spark negative sentiment on the US dollar.
“There was way too much hype in the long-dollar trade related to Trump at the start of this year,” said Brad Bechtel, the global head of FX at Jefferies. BLOOMBERG
