Hedge funds are turning more negative on the US dollar, with investors building short positions as expectations grow that a potential extension of a US Iran ceasefire could reduce safe-haven demand, according to Bloomberg.
A Morgan Stanley model shows investors added to short-dollar positions through 10 April, while Goldman Sachs data points to positioning shifting from strongly bullish to closer to neutral.
Derivatives markets echo the move. Bloomberg dollar index risk reversals have eased to late-February levels, and euro-dollar options activity now leans toward euro strength, with rising demand for call options and related block trades.
The dollar rose 2.4% in March on geopolitical safe haven flows but has since fallen 1.9% in April, marking its longest losing streak since 2020 as diplomatic progress between the US and Iran gained traction.
Traders say hedge funds are using rallies to build shorts, with Bank of America’s Ivan Stamenovic noting funds have been “selling into strength.” Overall sentiment is shifting toward expectations of continued dollar weakness, especially against major peers like the euro, yen, and Swiss franc.