Investing.com — Investor flows for the U.S. dollar turned negative last week, reflecting shifts in market sentiment and positioning, Bank of America said.
Despite support from corporate demand, the USD experienced real money-induced supply pressure, which the bank said outweighed the Hedge Funds’ heavier positioning in favor of the currency.
This trend is said to align with recent weakness in USD price action.
“The USD could have weakened even further without corporate demand at the end of the month,” BofA said.
Among the G10 currencies, the Swiss franc (CHF) emerged as a standout, supported by both hedge funds and real money investors, according to BofA.
BofA attributes this demand in part to “increasing concerns around France,” where risks are capturing the market’s attention. This increase in CHF positioning comes despite the currency’s overall shortness among investors, signaling a cautious turnaround amid geopolitical and regional uncertainty.
Elsewhere, BofA said net options activity increased pressure on the euro-yen pair (EUR-JPY) last week.
While the JPY saw strong demand in the options markets, the euro continued to face supply pressure. “We predict further downside between the EUR and JPY in the coming months,” BofA analysts said. They noted the continued dynamic and subdued demand for USD in the options markets.
Despite the broader outflows, BofA highlighted that the USD has recently benefited from accelerating US equity flows by foreign investors.
This trend underlines the complexity of USD positioning as it continues to navigate the competing forces of investor demand across asset classes and regions.
