Invesco’s de Longis Goes ‘Maximum’ Underweight Dollar Before Fed

Invesco's Alessio de Longis has moved to a 'maximum' underweight position on the US dollar, marking his most bearish stance on the currency since June 2024. This heightened conviction is driven by the anticipation of Federal Reserve policy easing, which is expected to narrow yield differentials, alongside positive economic data surprises observed outside the US, collectively signaling further dollar depreciation.

Analysis

Invesco's senior portfolio manager, Alessio de Longis, has escalated his bearish conviction on the US dollar, shifting positioning to a "maximum" underweight in a September client note. This represents the team's most negative stance on the currency since June 2024. The strategic shift is predicated on two primary factors: the anticipation of Federal Reserve monetary policy easing, which would compress the dollar's yield advantage over peer currencies, and a concurrent trend of positive economic data surprises outside of the United States. The combination of a narrowing interest rate differential and strengthening relative fundamentals in other regions underpins this high-conviction view that the dollar is poised for further depreciation.

Key Decisions for Investors

• Investors should consider overweighting non-USD currencies, particularly those backed by positive economic data surprises, to capitalize on the expected dollar weakness.
• It may be prudent to review portfolios with significant US dollar-denominated assets for currency hedging strategies to mitigate downside risk from a potential Fed policy pivot.
• Closely monitor upcoming Federal Reserve communications and comparative economic data releases, as any hawkish deviation from the anticipated monetary easing would challenge this bearish dollar thesis.