As US coronavirus cases spiked sharply amid a second wave in many countries across the world, the sell-off in the greenback has sent the Bloomberg Dollar Spot Index tumbling more than 3% this month. 
With investor confidence going for a toss, the gauge is poised for its worst July since 2010.
Data from the Commodity Futures Trading Commission show that asset managers added to net long positions on the yen, the euro, the Canadian dollar and the Swiss franc.
As of now, investors are betting against the US currency. And the reasons are many: a worsening row with China, concerns that the US is struggling to contain the pandemic, the uncertainty of a November presidential election, and growing expectations that the Federal Reserve will have to slash policy rates further.
Once the stand-out nation in a world saturated with over $14.7tn of negative yielding debt, the US has seen that edge erode as the coronavirus crisis forced the Fed to slash borrowing costs to near zero and spurred bets of negative interest rates.
The downward pressure on the dollar has pushed investors to look to havens outside of the US, sending the spot price of gold rocketing past record heights toward a high of $2,000 an ounce. 
On the other hand, the euro is now a potential candidate for money managers seeking safety. The single currency’s surge past $1.17 to levels not seen since September 2018 could be the beginning stages of a shift toward the eurozone after the union banded together to agree on a historic recovery fund, according to a Bloomberg report.
After a landmark rescue package spearheaded by Germany and France, Europe has taken a step closer to fiscal integration - at least during times of severe crisis. 
For the first time, the European Union will sell joint debt to fund a €750bn ($870bn) emergency package. The deal raises new questions about whether the bonds can rival Treasuries as a safe asset, and if the euro can now pose a credible challenge to the dollar’s hegemony.
For sure, since the birth of the euro two decades ago, the currency has faced a lot of sceptics, arguing that a monetary union without a fiscal union would be doomed to fail. 
As a matter of fact, no one is expecting a full-blooded fiscal union and the recovery package is temporary and limited by design. But it sets precedent for officials to revisit in future. 
With Italy and Spain mired under heavy levels of debt and in the throes of a deep recession, the rescue fund is a bulwark for European solidarity.
Longer term, however, the dollar’s overarching sway over the financial world is here to stay. 
Roughly 66% of managers believed the greenback will remain the reserve currency of choice over the next 25 years, according to a 2019 UBS Asset Management survey of 30 central banks. The US currency is on one side of almost 90% of foreign-exchange transactions and accounts for two-thirds of international debt. 
Make no mistake, how the US currency moves - regardless of its direction - is the single most important determinant of sentiment across asset classes these days.