While the turnaround in positioning from long to short on the dollar shows that sentiment on the U.S. currency has deteriorated sharply, analysts say it should not be interpreted as a sign the greenback is about to collapse.

Fears that the U.S. economy is at risk of a double-dip recession after a string of weaker-than-expected data this month have been weighing on the dollar and helping contribute to a gradual erosion in long dollar positions.

Declines in the greenback accelerated last week and the euro hit a two-month high after the Federal Reserve's minutes of its last meeting showed policymakers were concerned the U.S. recovery may be slowing. Read more