According to a Bank of America survey on FX and rates sentiment, the long dollar trade is now considered the most crowded, with positioning emerging as the primary obstacle for the currency.
Analysts note that dollar positioning presents a significant challenge, a concern they also share. They highlight that long dollar positions are notably elevated compared to historical trends, especially in relation to the past year.
Additionally, FX positioning helps explain why only 20% of respondents consider a long U.S. dollar position their strongest conviction trade, despite 42% anticipating 10-year U.S. Treasury yields to exceed 5%.