Investing.com – The U.S. dollar has been broadly sold off, according to analysts at Bank of America, and further losses remain possible.
“Our own flows show broad-based selling of the US dollar so far in August, particularly by hedge funds and corporates,” Bank of America analysts said in an Aug. 19 note.
“The euro, Japanese yen and British pound have benefited the most, but recently the high-beta G10 currencies and emerging market currencies have also benefited. Hedge funds’ long positions in the US dollar remain vulnerable.”
Although sterling is the weakest G10 currency so far in August, our investor flows remain positive, with hedge funds in particular providing strong support.
“The sterling position is long, but not overextended, with hedge funds having more room,” Bank of America added.
Last week was the first time the bank’s emerging markets FX index turned positive since the recent market turmoil.
“Hedge funds bought the Indian rupee, the Korean won and the South African rand, and then sold the Hungarian forint. Real money bought the Brazilian real, the Indonesian rupiah, the Singapore dollar, the Polish zloty and the Czech koruna, and then sold the renminbi and the Israeli shekel,” the central bank said.
“Emerging market FX positions are generally somewhat short, with the exception of Asia where they were clearly short after the recent sell-off. Hedge fund short positions in emerging markets also appear to be overextended,” Bank of America added.