(Bloomberg) -- Hedge funds have turned bearish on the dollar for the first time in a year in a wager the US currency’s best days may be over. 

Leveraged investors flipped to a net short position on the greenback versus a basket of eight major peers last week, the first bearish shift since last August, according to data from the Commodity Futures Trading Commission. Hedge funds had been some of the biggest champions of the dollar this year due to a hawkish Federal Reserve and concern over slowing global growth.

Sentiment may be shifting as signs emerge that aggressive Fed interest-rate hikes may finally be cooling the quickest US inflation in four decades. The Bloomberg Dollar Spot Index has fallen more than 3% from an all-time high in July after surging more than 14% in the year before that. 

“Funds do seem to be signaling peak dollar strength is past,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “They could be betting the Fed is going to peak out on the tightening cycle very quickly and they may even start cutting rates next year.”

Read More: King Dollar Upends the Global Economy With No End in Sight

Hedge funds raised their bullish bets on the pound during the same week to the highest since March 2020, the CFTC data show. They also cut their net-short bets on the Canadian dollar to the lowest since the middle of June, and trimmed bearish wagers on the yen, euro and Australian dollar.

Still, some analysts say it’s too early to write off the dollar just yet.

The US currency may only reach its high later this year after the market gets confirmation the Fed’s tightening cycle has truly peaked, according to Westpac Banking Corp. 

“I’m not yet convinced the USD peak is in,” said strategist Imre Speizer. “It’s probably more likely a fourth-quarter story.”

©2022 Bloomberg L.P.