Global investment strategy firm BCA Research has advised clients to sell the U.S. dollar against five currencies, citing a combination of declining U.S. real interest rates and waning foreign appetite for American assets.
The firm recommended short positions in the South Korean won, Japanese yen, Taiwan dollar, Singapore dollar and euro, while maintaining long exposure to the won, yen and Taiwan dollar against the greenback. BCA also held the Hungarian forint as a euro proxy. The recommendations were driven by expectations that U.S. core real yields—defined by BCA as inflation-protected Treasury yields excluding the term premium—will decline further.
BCA noted that recent increases in U.S. yields have been driven primarily by higher fiscal and inflation-related term premiums rather than stronger growth expectations. The firm also highlighted that foreign purchases of U.S. equities tied to artificial intelligence enthusiasm had previously helped finance America’s wide current-account deficit and supported the dollar. BCA expects these inflows to slow if expensive U.S. technology shares weaken.
The firm’s currency outlook is supported by current-account surpluses in the recommended currencies, as international investors reduce exposure to U.S. assets. BCA expects the Chinese yuan to appreciate against the dollar but anticipates that authorities will limit those gains through intervention, leaving the yuan weaker against other surplus currencies.
BCA also expects the Brazilian real, Indonesian rupiah and Philippine peso to underperform, making them less attractive alternatives to the dollar. In broader asset allocation, the firm maintained an underweight stance on U.S. equities, a neutral view on emerging markets, a modest overweight on Europe and a substantial overweight on Japan. A weaker dollar is expected to benefit gold and gold-mining shares, while BCA also favors non-U.S. government bonds after any near-term selloff.
