Synopsis:
According to BofA’s latest FX and Rates Sentiment Survey, short USD is now the highest conviction trade among institutional investors for 2025. Despite this, investors have not significantly rotated out of US duration, suggesting that de-dollarization is being expressed more through FX hedge ratios than actual asset reallocation.
Key Points:
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Top Trade: Short USD ranks as the most confident trade among investors, outpacing long rates.
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No Big Duration Shift: Investors remain near benchmark duration in both US and Europe, highlighting that bearish USD positioning isn’t yet matched by bond allocation shifts.
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Drivers of USD Weakness: Survey participants cite fiscal concerns and policy uncertainty as key contributors to the dollar’s decline.
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EUR Favored: The euro is widely viewed as a primary beneficiary of USD weakness, with strong consensus on long EUR positioning.
Conclusion:
BofA’s survey reinforces the broad institutional bearishness on the dollar, though not yet accompanied by large-scale US bond market exits. Instead, investors are adjusting FX exposure via hedging, with EUR seen as the preferred counterweight to USD weakness.
