Most FX Strategists Remain Bearish on the Dollar, but Divergence Widens
Alina Collins
A Reuters poll shows most strategists still expect the dollar's recent rally to fade within months, but the bullish minority is growing fast — the market is splitting over what the Fed does next.
Why has the dollar rallied recently?
The dollar has bounced roughly 4% from its May low, driven by four forces at once: inflation staying above target, economic resilience, elevated Treasury yields, and hawkish Fed signals.
CFTC data show net long dollar positioning at its highest since January 2025. This means → real-money bets have already swung bullish, not just forecasts.
Rate futures now price in close to two hikes this year — the market is paying up for "the Fed won't let go any time soon."
The mainstream says the dollar will weaken — on what basis?
The poll's median forecast: EUR/USD at 1.16 by end-September, 1.17 by year-end, 1.18 in a year — in short, the consensus call is dollar weakness.
Jane Foley, head of FX strategy at Rabobank, lays out the logic: the Fed could pivot to cuts by 2027; once current hike expectations get priced out, the dollar loses support.
In plain terms = the bears are betting that "this hawkish stretch won't last — rates will eventually reverse."
The bullish camp is growing — by how much?
71% of respondents (29 of 41) expect net long dollar positioning to hold or increase through end-July. None expect a flip to net short.
About one-third of strategists (23 of 70) forecast EUR/USD flat or lower within three months, up from roughly 20% in the June poll.
This means → dollar bulls are shifting from "fringe minority" to "sizeable minority" — the consensus is loosening.
What are the bulls and bears actually arguing?
Alex Cohen, FX strategist at Bank of America, has raised his forecast: the dollar will appreciate further at least through Q3, and he expects three Fed hikes this year. He sees Fed Chair Kevin Warsh's stance on inflation as a clear bullish signal.
Dan Tobon, head of G10 FX strategy at Citi, goes further: EUR/USD has a meaningful chance of falling to $1.11 — more than 4% below the poll median.
His logic: strong data → more hawkish repricing → dollar up; weak data → existing hawkish expectations won't unwind quickly → dollar still supported. In plain terms = he thinks the dollar has an asymmetric edge in the short term.
What about the yen?
The yen hit a 40-year low earlier this week and hovers near 163 per dollar, fueling expectations of Japanese intervention.
Yet strategists still see a gradual recovery: the median forecast is 159 by end-September, 156 by year-end, 154 in a year.
The logic rests on Japan's own persistent inflation pushing the BOJ to keep tightening after its recent hike. This means → the yen's "rescue" isn't an external event — it's Japan's own rate normalization.
What's the one thing to watch in the second half?
There is one core verification point: can the hawkish Fed expectations keep delivering?
If inflation and growth data keep supporting hikes, dollar longs will grow and the bearish consensus could crack.
If data soften and hike expectations are pulled back, the mainstream dollar-weakness script reactivates. In plain terms = the dollar's direction in H2 is essentially a bet on whether the Fed will really hike as many times as the market now expects.
Content is for reference only, not financial advice.