The US dollar could lose its safe-haven status, analysts at Goldman Sachs believe. Many asset managers are reportedly betting against the greenback. According to the US Commodity Futures Trading Commission, hedge funds have increased their net short dollar positions for six consecutive weeks, marking the longest streak since 2022.
The dollar's current weakness can be attributed to rising employment in the United States. In May, job growth exceeded economists' expectations, which in turn dashed traders’ hopes for an imminent interest rate cut by the Federal Reserve.
Nevertheless, Goldman Sachs suggests that a robust US labor market contributes to a rally in the American currency. According to the bank, investors will turn to the greenback as a safe-haven asset, seeking refuge amid uncertainty over the upcoming presidential election and high-yield assets.
Thus, the greenback has recently gained against other G10 currencies. The Bloomberg Dollar Spot Index posted its biggest one-day advance since January 2024.
Looking ahead, many economists anticipate two rate cuts by the Fed. However, there remains a slight risk that the regulator could hold its benchmark interest rate steady this year if the US labor market remains robust. This could lead to higher bond yields, a stronger dollar, and a sell-off in the stock market.