DBS Flags Elevated Risk for Dollar Longs Ahead of FOMC Decision

DBS has warned that US dollar net long positioning is stretched ahead of the upcoming FOMC decision, creating elevated two-way risk and the potential for sharp unwind if the Fed signals a less hawkish stance.

The analysis by DBS strategists is based on the latest Commitment of Traders (COT) data, which indicates that speculative positioning in the US dollar has become stretched. This creates a situation where traders who have built up bullish bets on the greenback may be vulnerable to a sharp reversal if the Fed's policy statement or interest rate decision deviates from current market expectations.

The FOMC meeting is scheduled to conclude on [date of meeting, e.g., May 7, 2025], and traders are advised to manage risk as a softer Fed could weaken the dollar and boost risk assets including crypto, DeFi, and emerging market currencies. Conversely, a hawkish surprise would strengthen the dollar and amplify market volatility.