A worker counts U.S. dollar banknotes at a currency exchange office in Jakarta, Indonesia, on Wednesday, 2 March 2022. 
Investors boosted short positions on the reserve currency to 321,758 contracts last week, the most since July 2021, according to data from the Commodity Futures Trading Commission on eight currency pairs compiled by Bloomberg. Hedge funds are similarly bearish: they sold the greenback for a fifth consecutive week.
“The dollar’s exceptionalism premium is receding as the Fed approaches maximum hawkishness,” said John Bromhead, strategist at Australia & New Zealand Banking Group Ltd. “The safe haven premium is also falling as the backdrop improves,” with the Europe energy situation looking less dire, he added.
Debate is raging on whether the dollar’s best days are over as recent commentary from Fed officials and easing US inflation fuel talk of smaller rate hikes. Goldman Sachs Group Inc and Wells Fargo are among those betting on further strength in the greenback, while M&G Investments expects the Fed to turn more cautious about tightening.
The Bloomberg Dollar Spot Index has fallen more than 5% since a September peak, and was up 0.1% on Monday morning in Asia.
“Weak global growth and less CPI inflation allow the Fed to pause, driving US rates and the US dollar lower” in 2023, Morgan Stanley strategists including Matthew Hornbach wrote in a note. BM/DM