The US dollar ended 2024 with strong momentum, particularly against emerging market currencies (EMFX), with the trend accelerating in the fourth quarter.
Hedge funds took notably aggressive positions favoring the dollar, while investor interest in dollar purchases against emerging market currencies was also reflected in options trading.
Among major developed market currencies (G10), investors finished the year with strong positions in both the US and Australian dollars, while showing negative sentiment toward the Canadian dollar, New Zealand dollar, and Swiss franc.
The fourth quarter saw particularly strong dollar demand against the euro and British pound.
The Norwegian krone and Canadian dollar were the most heavily sold currencies throughout 2024. Hedge funds reached maximum long positions in both the Australian dollar and the US dollar while taking their largest short positions in the Canadian dollar.
Institutional investors maintained substantial long positions in British pounds, along with positive positions in Australian and US dollars, while holding negative positions in Norwegian krone, New Zealand dollar, and euro.
Corporate and official institution trading remained relatively quiet for the euro-dollar pair throughout the year, though official institutions provided some support for the euro-dollar exchange rate by selling dollars and purchasing euros earlier in the year.
Corporate flows supported the Norwegian krone while creating downward pressure on the New Zealand dollar and Swedish krona.
near-maximum and significant short positions
In emerging markets, investors ended 2024 with near-maximum short positions in Asian currencies and significant short positions in Latin American currencies, while maintaining modest long positions in Eastern Europe, Middle East, and African currencies (EMEA).
The negative sentiment was particularly pronounced among hedge funds in the fourth quarter, with both option flows and positioning reflecting bearish views across all emerging market regions.
Within Asia, the fourth quarter saw broad selling, most notably in the Indian rupee and Singapore dollar, though the Indonesian rupiah and Chinese yuan showed some resilience.
Investors ended the year with substantial short positions in the Taiwan dollar, Singapore dollar, and Korean won, while the Indonesian rupiah emerged as a clear favorite. The Chinese yuan saw divergent flows, with hedge funds selling while institutional investors maintained buying positions.
The Eastern Europe, Middle East, and Africa region faced widespread selling in the fourth quarter, influenced by U.S. election-related uncertainty affecting emerging market currencies broadly.
Only the Turkish lira and Israeli shekel attracted inflows, primarily from hedge funds and institutional investors respectively. Latin American currencies experienced aggressive selling in the fourth quarter from both hedge funds and institutional investors, adding to already-short positions, with particularly bearish sentiment toward the Brazilian real and Mexican peso.