Investors are now more bearish on the U.S. dollar than ever before, with positioning reaching record lows according to Bank of America's latest FX and rates sentiment survey. The survey of 42 fund managers overseeing $702 billion in assets found that exposure to the greenback has surpassed previous lows from April 2025, hitting levels not seen since data collection began in January 2012.

Despite easing concerns about Federal Reserve independence following Jerome Powell's replacement with Christopher Waller, bearishness on the dollar has intensified rather than diminished. The survey reveals that most investors now prefer to increase their FX hedge ratios or reduce their overall exposure to U.S. assets. Additionally, 87% of respondents expect further reductions in the dollar's share of global reserves, with some anticipating a more rapid decline.

Short USD positions are gaining traction as crowded trades, though long risk remains the most cited crowded position. Bank of America strategists note that most responses were collected before the latest positive U.S. jobs report, which could potentially ease some of the current bearishness. The reduced U.S. exposure may benefit fixed income markets more than equities, with growing investor belief that flows out of the U.S. and into Europe will gain traction within fixed income markets.