Investor positioning in currencies has swung notably toward the U.S. dollar as global fund managers reassess risk in the face of heightened geopolitical uncertainty, according to Bank of America’s most recent FX and rates sentiment survey.
The survey, carried out between March 6 and March 11 among 39 global fund managers overseeing $632 billion in assets, found that geopolitical tensions have reduced conviction across asset classes and prompted substantial currency repositioning.
Respondents signaled a clear fall in conviction: when asked about their highest-conviction trade for the year, the most common answer was "Other/Don’t know," reflecting a broader hesitation to commit to concentrated FX views.
One of the most pronounced changes recorded in the survey concerns emerging market currencies versus the dollar. Both sentiment and positioning for EM currencies have declined to levels last observed in April 2025, indicating a retreat from risk-sensitive FX exposures.
Concurrently, U.S. dollar exposure has rebounded quickly. Long USD positions have become a favored trade for the first time in months as managers pare back broader risk exposure. Strategists led by Ralf Preusser summarized the shift in positioning, noting:
"USD positioning swung rapidly from a record underweight a month ago to neutral levels, with investors viewing traditional “risk off” as the biggest upside risk from here."
The survey also captures investor uncertainty about the geopolitical outlook and energy markets. Participants were split on how long the recent Middle East conflict will endure, though the single largest share expects the disruption to persist for one to three months. Many managers additionally anticipate oil averaging $90 per barrel or higher over the next three to six months, signaling concern about sustained energy-price pressure.
Despite these shifts in FX views and risk appetite, positions tied to interest-rate expectations were comparatively stable. Strategists pointed out that duration exposure changed little after the recent geopolitical escalation, which suggests investors are reluctant to materially alter rate forecasts even as risk sentiment has weakened.
Overall, the survey depicts a market environment of reduced conviction, a reversion into U.S. dollar exposure, and guarded positioning on rates as managers weigh the implications of geopolitical developments and potential energy-price trajectories.