Speculative bets against the dollar have built up to their highest level in nearly three years, as bears cling to their view on the currency despite its near 1 per cent rebound this year.

A strong run for the world’s reserve currency against its peers has pushed the euro down to near $1.20 from its high above $1.23 earlier this month.

But speculative investors such as hedge funds amassed more than $10bn of bets against the dollar as of January 12 — the most since March 2018 — according to the latest available data from the US Commodity Futures Trading Commission.

Across a broader group of investors, including asset managers, cumulative negative bets on the buck are around their highest levels in a decade.

“The speculative community is very short right now, but there is a good reason: because fundamentals still point to a weaker dollar in the medium term,” said Vasileios Gkionakis, head of currency strategy at Lombard Odier.

The dollar lost nearly 7 per cent last year as interest rate cuts reduced the attraction of dollar assets. Many investors are sticking to their view that looser monetary policy in the US compared with rival economies such as China mean January’s rebound will not last.

The consensus view for a weaker dollar was tested earlier this month by Democratic party wins in key Senate run-off elections in Georgia that prompted analysts to price in a larger fiscal stimulus. That fed through to a sell-off in US government bonds, pushing their yields back to more attractive levels, and lifted the dollar.

The detachment between the hedge fund bets and the path of the currency has raised concerns that any moves by speculative investors to unwind their trades could trigger a snap correction higher.

But Adarsh Sinha, a Hong Kong-based currency strategist at Bank of America, played down concerns about positioning.

“Short dollar positions are indeed close to levels that have typically preceded rallies over the past decade,” Mr Sinha said. But looking back over a longer period, such as the downward trend in the dollar during the 2000s, there were “long periods” where bets against the buck were even more popular than they are now, he added.

Lombard Odier’s Mr Gkionakis said that a gloomy outlook is likely to be proved right, as the post-crisis rebound in the global economy could prove stronger than currently expected, he thinks, tempting investors to leave behind the safety of the dollar.

Mr Gkionakis expects the euro to trade at $1.27 by the end of the first six months of the year. “I think the speculative community is right to be short dollar,” he added.