Some investors worry the dollar trade has become excessively crowded, raising the risk of a sharp unwind if the case for owning the currency changes and investors try to exit their positions all at once.
International Monetary Market speculators held a net long U.S. dollar position of $10.23 billion for the week ended Sept. 20.
Barring a brief period of peak pandemic-related uncertainty, broad net options positioning data going back to 2014 shows U.S. dollar long positions are the most stretched ever, according to Morgan Stanley.
While a hotter-than-expected u.s. inflation report in August dashed those hopes and sent the dollar higher, the dangers stemming from the crowded dollar trade have only grown, investors said.
But with the dollar scaling new multi-decade highs, positioning for a pullback can be painful.