Bank of America’s latest investor poll shows a clear adjustment in foreign-exchange positioning since the outbreak of war in Iran: respondents substantially pared short positions on the U.S. dollar, but have not transitioned into long dollar bets.
The survey indicates that the bulk of shorts were closed aggressively as the conflict began. Since then, positions and sentiment have been largely stable compared with the prior survey, suggesting that participants view the episode as producing a temporary level shift in the dollar rather than a change in the directional outlook for 2026.
Drivers of continued dollar weakness
Investors cited concerns about growth that outweigh worries about inflation, a combination that underpins the persistent bearish tilt toward the dollar. The survey respondents expressed confidence that the Federal Reserve will adopt a dovish approach to monetary policy, reinforcing the subdued appetite for long dollar exposures.
Interest-rate positioning
Following a recent sell-off, conviction to take long positions on rates increased materially among respondents. However, that increased conviction has not translated into long-duration positions versus benchmarks. Instead, survey participants appear to be favoring exposure to the front end of global rate curves, signalling that they see relative value in shorter-term yields. The majority of those surveyed believe front ends are already sufficiently priced.
Emerging markets
The survey also found that emerging market positioning now appears clean, a condition that could allow EM assets to benefit if geopolitical sentiment continues to improve. That assessment reflects investor positioning rather than a directional forecast.
This snapshot from the Bank of America survey highlights a market that has adjusted risk positions in response to geopolitical shock but remains cautious about establishing fresh bullish dollar exposure. Views on growth, inflation, and Fed policy are central to that cautious stance, while fixed-income front-end valuations and emerging-market positioning are specific areas where participants see current dynamics as relevant.