Wash nomination sparked the rise of the US dollar, fund manager still insists on a bearish view despite "empty stepping"

Just a few days before the news of Kevin Wash being nominated by Trump as the chairman of the Fed triggered the biggest surge in the US dollar since May, asset management companies increased their bearish positions on the US dollar. According to data from the US Commodity Futures Trading Commission (CFTC), as of the week ending January 27, fund managers increased their short positions on the US dollar by $8.3 billion, marking the largest increase since April 2025. At the same time, hedge funds reduced their net long positions on the US dollar by $5.1 billion, the largest decrease since July 2024. Last Friday, the US dollar rose in response to news that President Trump had selected Wash to succeed the Fed chairman, Powell, who is set to step down in May. Wash is seen by some as a policy hawk. In addition, the decline in precious metal prices also boosted the US dollar. Michael Brown, Senior Research Strategist at Pepperstone Group Ltd., said, "Considering the rebound in the US dollar, the situation of short positions on the US dollar may be quite bad by the end of this week. Despite the continued policy uncertainty and the Trump administration's possible further efforts to weaken the US dollar, there are still plenty of reasons to continue to short the US dollar." Last month, threats to Greenland and Trump's apparent support for selling the US dollar sparked a debate about the long-term devaluation of the US dollar, with selling the US dollar becoming a popular trading strategy. However, last Friday's 0.9% rise in the US dollar served as a reminder to traders that the weak trend of the US dollar is far from linear, indicating that traders believe Wash may be able to counter price pressure by implementing policies that support the US dollar. In early Asian trading on Monday, the US dollar saw significant volatility, initially strengthening against most major currencies before turning lower. The US dollar index has fallen by about 1.3% since the beginning of the year, and has cumulatively fallen by 8.1% since 2025. Despite a rebound last Friday, many market participants warn that the US dollar may continue to weaken. Jeffrey Gundlach, CEO of DoubleLine Capital, said last week that the US dollar has not played the role of a safe-haven currency for some time, and unpredictable policy making by Trump and the massive US deficit continue to put pressure on the US dollar. Ahmad Saidali, founder and chairman of Redwood Heritage Group, wrote about the US dollar's decline since January last year, saying, "This is not a market volatility event, but a currency devaluation." Analysts point out that part of the reason for the US dollar rebound seems to be market expectations that Wash's stance may be more hawkish than some had previously feared for the next Fed chairman. As February trading begins, many strategists still insist that the US dollar will face greater pressure. Goldman Sachs, Amundi Asset Management, and Eurizon SLJ Capital all believe that the US dollar will weaken in the future, but any decline may not be smooth. In fact, despite concerns about an artificial intelligence stock bubble, the volatility in currency and precious metals is much greater than in stocks at the moment. Kamakshya Trivedi, a strategist at Goldman Sachs, wrote in a report, "It is worth noting that the increase in foreign exchange volatility is similar to that of April last year, while interest rates and stock markets have not experienced a similar situation. The recent increase in policy uncertainty will continue to exist, enough to prevent the US dollar from regaining lost ground."