(Bloomberg) — Hedge funds have capitulated on their short-dollar bets after surging Treasury yields upended a favourite world macro technique.Leveraged funds flipped to turn into web consumers of the world’s reserve forex through the week to March 16 — a tumultuous interval that noticed Treasury yields breaching key ranges on feverish inflation fears. They added bearish bets on the yen and euro, and switched from bullish positions on the New Zealand greenback, information from Commodity Futures Buying and selling Fee present.An intensifying debate over the tempo of inflation positive factors has cut up buyers, with some seeing Treasury yields hovering to 2% amid a worldwide restoration spurred by vaccine rollouts and stimulus spending. That in flip is trouncing one in every of Wall Road’s hottest macro calls of 2021.The good unwind may be gaining traction, some strategists mentioned.“It’s the bond market that has been driving the U.S. greenback up to now couple of months, and it seems to be intensifying,” mentioned Alvin T. Tan, head of Asia foreign-exchange technique at RBC Capital Markets. “I’d anticipate additional short-covering versus the U.S. greenback.”Holding greenback shorts would have served merchants a 1.8% loss this yr after being a worthwhile technique in eight of the 9 months via to December, Bloomberg information exhibits.Greenback shopping for by hedge funds rose to essentially the most since August 2014, in response to an evaluation by Australia & New Zealand Banking Group Ltd. strategists together with Khoon Goh. “With U.S. 10-year bond yields poised to rise additional, anticipate monetary market volatility to extend,” he mentioned.Hedge funds’ lengthy greenback positions climbed to 2,414 contracts, in contrast with shorts of 62,781 every week earlier, in response to CFTC information on seven main currencies aggregated by Bloomberg. It’s the first time they’re bullish on the dollar since November.The Bloomberg Greenback Spot Index rose Monday earlier than buying and selling little modified, after the Turkish lira’s plunge spurred demand for haven property. In the meantime, there have been indicators that commodity-linked currencies have been shedding momentum.The Australian greenback, one of many yr’s finest performers thus far, led G-10 losses to fall as a lot as 0.7%, its lowest degree in almost two weeks. The pound additionally slipped, because the U.Ok.’s feud with the EU over vaccines intensified.“U.S. Treasury yields and virus dynamics will in all probability decide the place the leverage neighborhood will land,” mentioned Rodrigo Catril, forex strategist at Nationwide Australia Financial institution Ltd. in Sydney. Whereas the pound and commodity-linked currencies have risen towards the greenback this yr, “any query marks on vaccine provides or commodity weak point will possible see these pairs come underneath strain.”(Updates with further chart, costs.)For extra articles like this, please go to us at bloomberg.comSubscribe now to remain forward with essentially the most trusted enterprise information supply.©2021 Bloomberg L.P.