Foreign investors cut dollar asset holdings — Reuters

Reuters analysts note that global investors appear to be gradually reducing their dollar-denominated asset holdings. This trend has driven the US currency to its weakest level against a basket of major currencies in 3 and a half years.

According to Bank of America, European investors (pension funds and insurance companies) have been the primary drivers of dollar selling in the second quarter. These institutions reduced their dollar positions to the lowest levels since 2022 within just weeks.

However, the picture isn’t so clear-cut. Reuters research reveals that most of the dollar’s average daily declines in recent months have occurred during Asian trading sessions.

UBS analysts estimate that eurozone investors account for 25% of foreign holders of US equities, noting that they have loaded up on American stocks in recent years. Asian traders hold approximately one-third of overseas-held US Treasuries and agency debt. According to UBS, this leaves the dollar particularly exposed in case Wall Street's underperformance versus these markets persists.