Global investors are more bearish on the U.S. dollar than at any point in at least 14 years, according to a recent survey by Bank of America.
The February survey reveals that USD positioning has fallen to the most underweight level in the bank’s data set going back to January 2012.
In other words, investors are holding less dollar exposure than ever recorded in the survey’s history. Dollar’s underweight positioning has now surpassed the previous lows seen during the Trump’s tariff shock in April 2025.
Fed Independence Fears Fade — But Dollar Demand Doesn’t Return
What makes this shift particularly striking is the backdrop.
“Following the nomination of Warsh as the new Fed chief, worries regarding Fed independence has meaningfully abated. However, it did not translate into greater demand for the dollar nor renewed optimism on US assets,” said Ralf Preusser, CFA.
Instead, investors remain skeptical. Most now say they prefer to increase FX hedge ratios or actively reduce U.S. asset exposure.
Expectations are building that global reserve managers will continue reducing their dollar allocations, with a growing minority anticipating an accelerated pace of diversification.
In short: the dollar has become a consensus underweight.
Earlier this month, Atlanta Fed President Raphael Bostic said he’s seeing early signs that confidence in the US dollar is being questioned. He warned such doubts could create “rippling in the valuation of the dollar.”
Could Strong Job Gains Change The Script?
There’s a relevant caveat here.
Most survey responses were collected before the latest stronger-than-expected U.S. jobs report.
Last month, nonfarm payrolls significantly exceeded expectations, rising by 130,000 versus forecasts of 70,000 — a sharp acceleration from December’s 48,000 gain.
On top of that, the unemployment rate unexpectedly slipped from 4.4% to 4.3%.
That resilience in economic data is seen by nearly half of respondents as the primary potential near-term catalyst for a dollar rebound.
Beyond the near-term economic data, there may be a more structural force helping to limit further downside in the dollar.
Why Dollar Weakness Has Structural Limits
In his latest outlook, Claudio Irigoyen, economist at Bank of America stressed that while the U.S. dollar may soften further, there are clear limits to how far it can fall.
“Despite uncertainty and policy changes, the relative outperformance of the US shows no signs of cracking,” Irigoyen said.
He indicated that any sustained or sharp decline would likely trigger policy responses abroad — particularly from central banks unwilling to tolerate excessive currency strength against the greenback.
Moreover, the U.S. economy continues to outperform peers and maintains a productivity advantage.
These forces have allowed the U.S. to sustain a large savings-investment imbalance — largely tied to persistent fiscal deficits — even as the currency appreciated.
In effect, the U.S. has continued to benefit from what economists call its “exorbitant privilege”: the ability to attract global capital despite widening deficits.
And despite a year marked by political shifts and policy changes, Irigoyen sees little evidence that the underlying resilience of the U.S. economy is cracking.
“The US remains a global growth engine, while most other advanced economies are in a weaker position,” Irigoyen said.
According to Irigoyen, a significant real depreciation of the dollar, he argues, would amount to a recessionary shock for much of the world outside the United States.
“In addition, a disorderly depreciation is not in the interest of anyone, neither the US nor the rest of the world,” he added.
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