Hedge funds are betting the US dollar’s recent stretch of weekly declines – the longest in almost three years – is set to reverse, as investors ramped up pricing for Federal Reserve rate cuts, according to a report by Bloomberg.

New Commodity Futures Trading Commission data shows leveraged funds were net short all major currencies against the dollar last week for the first time since January 2022.

While investors’ overall stance on the US currency remains bearish,  the optimism among hedge funds potentially reflects receding concern over the impact of the banking crisis on the Fed’s willingness to battle inflation.