Private investment firms that bet on macroeconomic trends are now wagering on the appreciation of the U.S. dollar, according to data from Bank of America Merrill Lynch about hedge fund clients.
The firms reversed course after attempting to make money on the greenback's decline earlier in the year. The dollar has fallen by about 0.6 percent versus the euro and about 3 percent versus the yen so far in 2014.
Fund managers were likely encouraged by Federal Reserve Chair Janet Yellen's March 19 remarks on the economic recovery, which provided further evidence for traders that interest rates would increase in 2015. Rising interest rates are typically correlated with currency appreciation as more foreign money flows in because of the relatively high lending rate.