Global investment strategy firm BCA Research has advised clients to sell the U.S. dollar against five currencies, citing expectations for lower U.S. real yields and a slowdown in foreign portfolio inflows that have supported the greenback. In a note published on Sunday, the firm recommended short positions in the South Korean won, Japanese yen, Taiwan dollar, Singapore dollar and euro.
BCA maintains long exposure to the won, yen and Taiwan dollar against the dollar, while using the Hungarian forint as a proxy for euro strength. The firm expects the Chinese yuan to appreciate versus the greenback but anticipates authorities will curb gains through intervention, leaving the yuan weaker against surplus currencies.
The bearish dollar view is underpinned by projections that U.S. core real yields—defined as inflation-protected Treasury yields excluding the term premium—will decline. Recent increases in U.S. yields have largely reflected higher fiscal and inflation-linked term premiums rather than stronger growth expectations, BCA noted. Foreign purchases of U.S. equities tied to AI enthusiasm have helped finance America’s wide current-account deficit and supported the dollar, but the firm expects these inflows to wane if expensive U.S. tech shares correct.
Currencies recommended for selling the dollar are backed by current-account surpluses, which BCA expects will provide support as international investors reduce exposure to U.S. assets. The firm anticipates the Brazilian real, Indonesian rupiah and Philippine peso will underperform.
On broader asset allocation, BCA recommends underweighting U.S. equities, maintaining a neutral stance on emerging markets and modestly overweighting Europe. The firm favors a substantial overweight in Japanese equities, while a weaker dollar is expected to benefit gold and gold-mining shares. BCA also favors non-U.S. government bonds after any near-term pullback in global fixed-income markets.
