Investing.com -- Investor flows for the US dollar turned negative last week, reflecting shifts in market sentiment and positioning, according to Bank of America (NYSE:BAC).
Despite support from corporate demand, the USD experienced Real Money-led supply pressures, which outpaced heavier Hedge Fund positioning in favor of the currency, according to the bank.
This trend is said to align with the recent weakness in USD price action.
“USD may have softened more without month-end corporate demand,” BofA noted.
Within the G10 currencies, BofA says the Swiss franc (CHF) emerged as a standout, supported by both Hedge Funds and Real Money investors.
BofA attributes this demand in part to "rising concerns around France," where risks have been drawing market attention. This increase in CHF positioning comes despite the currency's overall short stance among investors, suggesting a cautious pivot amid geopolitical and regional uncertainty.
Elsewhere, BofA said net options activity last week added pressure to the euro-yen (EUR-JPY) pair.
While JPY saw strong demand in options markets, the euro continued to face supply pressures. “We forecast more EUR-JPY downside in the next months,” BofA analysts said. They noted the ongoing dynamic and muted demand for USD in options markets.
Despite the broader outflows, BofA highlighted that the USD has recently benefited from accelerating US equity flows by foreign-based investors.
This trend underscores the complexity of the USD’s positioning as it continues to navigate contrasting forces from investor demand across asset classes and regions.