The Federal Reserve’s dovish shift is beginning to diminish the dollar’s appeal for currency speculators.

A Citigroup Inc index has dropped below zero for the first time since March 2018, indicating currency funds are holding net short positions on the US currency. That signals further dollar gains may be hard to come by after the greenback’s longest winning streak in three years.

“The Fed has become much less willing to hike, and there’s even a chance for a rate cut this year,” said Toshiya Yamauchi, chief manager for foreign-exchange margin trading at Ueda Harlow Ltd in Tokyo. “This has eroded the dollar’s yield advantage, leading to dollar shorts.”

The Bloomberg Dollar Spot Index fell for a second day on Wednesday, taking its decline this year to 0.2 per cent. The losses come after an eight-day winning streak following the Fed’s January 30 decision — when Chairman Jerome Powell said the case for further rate hikes has weakened — that took many investors by surprise.

Even so, economists predict the dollar will weaken against the euro, yen and pound throughout 2019, according to Bloomberg surveys. And with US economic growth and inflation forecast to slow this year, overnight-index swaps have started to price in a possible Fed rate cut.

“We don’t have evidence of strong inflationary pressures and we do have evidence of the growth rate slowing,” Fed Bank of Cleveland President Loretta Mester told reporters after giving a speech in Cincinnati Tuesday. “That combination of factors suggests we have this chance to look at how the economy is going to proceed. We don’t have to do anything preemptively.”