The Gist
News and Features
Global Philippines Fine Living
Insights
INVESTMENT STRATEGY
Economy Stocks Bonds Currencies
THE BASICS
Investment Tips Explainers Retirement
Webinars
2024 Mid-Year Economi Briefing, economic growth in the Philippines
2024 Mid-Year Economic Briefing: Navigating the Easing Cycle
June 21, 2024
Investing with Love
Investing with Love: A Mother’s Guide to Putting Money to Work
May 15, 2024
retirement-ss-3
Investor Series: An Introduction to Estate Planning
September 1, 2023
View All Webinars
Downloads
economy-ss-9
Economic Updates
Quarterly Economic Growth Release: 5.4% Q12025
DOWNLOAD
investment-ss-3
Economic Updates
Policy rate views: Uncertainty stalls cuts
DOWNLOAD
grocery-2-aa
Economic Updates
Inflation Update: BSP poised for a string of rate cuts as inflation cools
DOWNLOAD
View all Reports
Metrobank.com.ph Contact Us
Follow us on our platforms.

How may we help you?

TOP SEARCHES
  • Where to put my investments
  • Reports about the pandemic and economy
  • Metrobank
  • Webinars
  • Economy
TRENDING ARTICLES
  • Investing for Beginners: Following your PATH
  • On government debt thresholds: How much is too much?
  • Philippines Stock Market Outlook for 2022
  • No Relief from Deficit Spending Yet

Login

Access Exclusive Content
Login to Wealth Manager
Visit us at metrobank.com.ph Contact Us
Access Exclusive Content Login to Wealth Manager
Search
The Gist
News and Features
Global Philippines Fine Living
Insights
INVESTMENT STRATEGY
Economy Stocks Bonds Currencies
THE BASICS
Investment Tips Explainers Retirement
Webinars
2024 Mid-Year Economi Briefing, economic growth in the Philippines
2024 Mid-Year Economic Briefing: Navigating the Easing Cycle
June 21, 2024
Investing with Love
Investing with Love: A Mother’s Guide to Putting Money to Work
May 15, 2024
retirement-ss-3
Investor Series: An Introduction to Estate Planning
September 1, 2023
View All Webinars
Downloads
economy-ss-9
Economic Updates
Quarterly Economic Growth Release: 5.4% Q12025
May 8, 2025 DOWNLOAD
investment-ss-3
Economic Updates
Policy rate views: Uncertainty stalls cuts
May 8, 2025 DOWNLOAD
grocery-2-aa
Economic Updates
Inflation Update: BSP poised for a string of rate cuts as inflation cools
May 6, 2025 DOWNLOAD
View all Reports
Currencies 4 MIN READ

Crowd of dollar bulls raises risk of violent pullback

September 26, 2022By Reuters
Related Articles
China stocks drop on heightened trade tensions, automakers' price war November 29, 2024 US inflation shock zaps yen, China CPI up next April 10, 2024 Roaring Chinese stocks set for best week in a decade September 27, 2024

NEW YORK, Sept 26 (Reuters) – Some investors are growing concerned the dollar’s meteoric rise is setting the stage for a rapid reversal, which would bruise those who have sought refuge in the US currency in recent months.

Soaring US interest rates, a comparatively strong American economy and demand for a haven from wild gyrations in asset prices have lured investors to the dollar, driving it up about 22% against a basket of currencies in the past year.

Some investors worry the dollar trade has become excessively crowded, raising the risk of a sharp unwind if the case for owning the currency changes and investors try to exit their positions all at once.

“Positioning is crowded,” said Calvin Tse, head of global macro strategy, Americas, at BNP Paribas. “If we get a catalyst, the dollar can turn, and turn very aggressively,” he said.

International Monetary Market speculators held a net long US dollar position of USD 10.23 billion for the week ended Sept. 20. That is lower than a recent high of nearly USD 20 billion in July but marks the third-longest streak since 1999 in traders holding bullish positions on the greenback, with 62 straight weeks of long positioning.

Barring a brief period of peak pandemic-related uncertainty, broad net options positioning data going back to 2014 shows US dollar long positions are the most stretched ever, according to Morgan Stanley.

Some 56% of participants in BofA’s global fund manager survey in September named being long the dollar as the most “crowded trade,” the third straight month the greenback has held that position in the survey.

Investors may have already had a taste of what a reversal could look like when the dollar index retreated nearly 3% over the course of two weeks, starting in mid-July, as some investors bet US inflation might be set to moderate enough to allow the Fed room to pivot away from its path of aggressive interest rate hikes.

While a hotter-than-expected US inflation report in August dashed those hopes and sent the dollar higher, the dangers stemming from the crowded dollar trade have only grown, investors said.

“Undoubtedly, when you have a crowded trade, where you have investors all seeking the same thing, when perceptions do change, the reaction is a violent one,” said Eric Leve, chief investment officer at wealth and investment management firm Bailard.

“We could easily see a 10%-15% move the other way in the dollar vs euro or yen,” he said.

In 2015 and 2009, the last two instances when the dollar index rose more than 20% during a one-year period, the index subsequently logged a two-month drop of 6.7% and 7.7%, respectively, once the greenback peaked.

REVERSAL CATALYST

While crowded positioning can aggravate any potential reversal for the dollar, it would take a big fundamental change to cause that reversal, investors said.

Falling US interest rate volatility, normalizing European energy prices and China abandoning its zero-COVID policy are three prerequisites for the dollar to enter into a structural bear market, BNP’s Tse said.

“When those three are all checked off, it provides us more of a runway to see the dollar enter a bear market, but I don’t see these happening any time soon,” he said.

While US interest rates are above those in many other economies, almost every major central bank, including the European Central Bank and the Bank of England, has hiked rates as they step up their fight against high inflation, helping boost the allure of their battered currencies.

Any signs that US inflation could be easing might help revive expectations for a dovish pivot by the Fed, robbing the greenback of a crucial driving force.

A serious blow to the US economic outlook could also hurt the dollar, said Jack McIntyre, a portfolio manager at Brandywine Global.

The Fed’s aggressive policy tightening has boosted worries that the US economy could be headed for a recession next year.

The world’s three largest economies – the United States, China, and the euro zone – have been slowing sharply, and even a “moderate hit to the global economy over the next year could tip it into recession,” the World Bank said in a recent study.

“I think what weakens the dollar is increasing likelihood that the US goes into a recession, and that is not discounted in the dollar,” McIntyre said.

But with the dollar scaling new multi-decade highs, positioning for a pullback can be painful. “We have been fighting it a little bit, but it’s tough,” McIntyre said.

 

(Reporting by Saqib Iqbal Ahmed; editing by Ira Iosebashvili, Megan Davies and Paul Simao)

 

This article originally appeared on reuters.com

Read More Articles About:
Worldwide News Philippine News Rates & Bonds Equities Economy Investment Tips Fine Living

You are leaving Metrobank Wealth Insights

Please be aware that the external site policies may differ from our website Terms And Conditions and Privacy Policy. The next site will be opened in a new browser window or tab.

Cancel Proceed
Get in Touch

For inquiries, please call our Metrobank Contact Center at (02) 88-700-700 (domestic toll-free 1-800-1888-5775) or send an e-mail to customercare@metrobank.com.ph

Metrobank is regulated by the Bangko Sentral ng Pilipinas
Website: https://www.bsp.gov.ph

Quick Links
The Gist Webinars Wealth Manager Explainers
Markets
Currencies Rates & Bonds Equities Economy
Wealth
Investment Tips Fine Living Retirement
Portfolio Picks
Bonds Stocks Model Portfolio
Others
Contact Us Privacy Statement Terms of Use
© 2025 Metrobank. All rights reserved.

Read this content. Log in or sign up.

​If you are an investor with us, log in first to your Metrobank Wealth Manager account. ​

If you are not yet a client, we can help you by clicking the SIGN UP button. ​

Login Sign Up