A February survey by Bank of America reveals that investor sentiment toward the US dollar has fallen to the most bearish level recorded since tracking began.

The study, conducted from February 6 to 11 among 42 fund managers with combined assets of $702 billion, found that net dollar positions have dropped to levels not seen since January 2012, surpassing the lows of April 2025 included in the current sampling.

Bearish sentiment has strengthened despite reduced concerns regarding the independence of the Federal Reserve. Following Kevin Warsh’s nomination to head the Fed, the perceived risks of pressure on the regulator diminished among investors. However, it failed to spark a rebound in demand for the dollar or a reassessment of views on US assets, according to BofA strategists led by Ralph Proysser.

Changes in asset allocation confirm a prevailing trend: the majority of respondents prefer to either increase currency hedging or reduce investments in US assets.

Long-term expectations for the dollar’s role also remain pessimistic. A staggering 87% of respondents predict a further decline in the dollar’s share of global reserves, with an increasing number anticipating that this process will accelerate.

Short dollar positions have become one of the most popular “overcrowded” trades. While long positions in riskier assets are still often dubbed the most overloaded strategy, short positions in the dollar have noticeably increased in recent months.

Strategists note that most responses were collected prior to the release of the latest robust US jobs report. The resilience of macroeconomic data and a reassessment of expectations regarding Federal Reserve interest rates could partially alleviate pessimism and provide short-term support for the dollar.

However, it remains to be seen whether reduced US investments will lead to sustainable outperformance over the euro area. Analysts believe that potential beneficiaries of capital flows are more likely to be found in the debt market.

An increasing number of investors are expecting a shift of funds from the US into euro-denominated bonds. Duration positions in key European countries relative to the US have reached their highest levels not seen since 2013.

Despite the uptick in investments in European duration, overall sentiment towards the region has become more cautious. Investors are building positions, but their optimism has waned a bit.

In emerging markets, sentiment remains constructive. However, signs of cooling are becoming more pronounced. Positions in emerging market currencies and related expectations have reached highs not seen since the COVID-19 pandemic.

At the same time, managers have increased their cash allocations and reduced their previously expressed overweight in local bonds and emerging market debt in hard currency. This move indicates tactical caution rather than a strategic shift in perspective.