(Bloomberg) -- Hedge funds that have racked up the largest bets against the dollar in almost three years may be running headlong into a short squeeze.

With markets on edge over resurgent coronavirus cases and a contentious U.S. presidential election, predictions of the currency’s demise as the world’s number one haven appear premature. Investors went into the greenback’s strongest rally since April last week expecting losses in all-but-one of the Group-of-10 currencies versus the dollar, the first time since 2013, according to ING Groep NV data.

Few of those bets have been covered, according to the latest data. Speculative positions in futures linked to the ICE U.S. Dollar Index turned the most negative since November 2017, according to Commodity Futures Trading Commission data through Sept. 22. That suggests speculators may only be beginning to enter a world of pain.

“Dollar shorts were at multi-year highs, you surely cannot assume they have all been trimmed last week,” ING currency strategist Francesco Pesole said by e-mail. “There is definitely more room for the dollar to benefit from position-squaring.”

It serves to highlight the perils of taking wagers out against the dollar against the multitude of uncertainties reaped by the global pandemic. Toronto Dominion Bank described international foreign-exchange markets as between “rock and a hard place” while JPMorgan Chase & Co. said last week that the seasons had shifted into a “dangerous” year-end trading cycle, which promised to be “two-directional” for the dollar.

Throughout the summer, talk of a V-shaped recovery and trillions of dollars of stimulus had boosted reflation trades over defensive assets like the dollar. But the latest Federal Reserve policy meeting fell short of any concrete steps for more stimulus even while pandemic restrictions threaten to stifle economic green shoots.

“I wish we had been long,” said Mark Dowding, chief investment officer at BlueBay Asset Management who turned neutral after closing his short position on the dollar last month. “Economic data has shown signs of disappointment, Covid is getting worse and additional stimulus is not forthcoming.”

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