(Bloomberg) -- Hedge funds have turned bullish on the dollar for the first time since March as speculation builds that Federal Reserve policymakers will retain a hawkish bias when they meet this week.

Leveraged funds and other major players held a combined 18,000 net long positions on the dollar across eight major peers in the week ended Sept. 12, versus 25,175 net shorts the week before, Commodity Futures Trading Commission data show. The switch was driven by the biggest slide in euro longs since January as traders bet the European Central Bank is about done raising interest rates. 

“With the U.S. data remaining relatively strong, we believe the dollar rally will continue,” Win Thin, global head of currency strategy at Brown Brothers Harriman & Co. in New York, wrote in a client note.

“We expect a hawkish hold from the Fed this week that leaves the door open for further tightening,” he said. “On the other hand, virtually every other major central bank that’s meeting this week is expected to follow in the ECB’s footsteps and hike rates 25 basis points whilst signaling a peak is near.”

Investors have been turning more positive on the dollar over the past seven weeks after they had held the biggest net short against the greenback in more than two years at the end of July. The shift has taken place as the resilient US economy boosted the potential that Fed officials will stick with forecasts for at least one more rate hike this year, and led traders to trim bets on steep cuts in 2024. 

The US central bank is widely expected to keep policy on hold Wednesday, and the focus is more on the so-called dot plot that lays out rates guidance for coming years.

Newton Investment Management Ltd. is among investors who switched to becoming a dollar bull in recent months. “We went long dollar on growth differentials,” Trevor Holder, a money manager at Newton Investment in London, said in an interview last week.

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