(Bloomberg) -- Investors' dollar positioning and views are the most bullish since 2015, buttressed by expectation the Federal Reserve's hawkish pivot will translate into higher rates, according to a Bank of America Corp. survey.
A majority of respondents now expect the Fed to end its asset-purchase program in the first quarter of 2022, pulling forward expectations from the second quarter in the previous tally.
“Investors pivot on the Fed, however, continues to come with low terminal rate expectations, which is one of the reasons why the curve has flattened so meaningfully in this latest move,” strategists Ralf Preusser and Myria Kyriacou wrote.
Read: Consumer Prices in U.S. Climb at Fastest Annual Rate Since 1982
Respondents cited central bank tightening as the biggest risk to the market in 2022, followed by inflation and peaking liquidity.
The dollar's rally in 2021 comes ahead of any rate hikes from the central bank, with the Bloomberg Dollar Index on track for its strongest year since 2015. Conversely, most-emerging market currencies have floundered: Only three of the 24 tracked by Bloomberg have gained against the dollar.
In addition to shifting dollar bets, emerging-market currency exposure has turned negative for the first time since 2018, they wrote. The strategists said that the December Fed meeting still has room to drive both positions further, while noting that positions have already shifted and that investors have reduced some portfolio risk.
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