Investors are gearing for a strong dollar environment next year alongside more sluggish economic growth in China, according to a December poll.

A 58 per cent majority of global investors expect the US Federal Reserve to raise rates at least three times in the coming year, according to a survey by BofA Merrill Lynch.

In line with rate hike anticipation, the survey, which was carried out on 215 panellists with $620 billion of assets under management, found long US dollar to be the “most crowded trade” in December for 53 per cent of the panel, up from 32 per cent last month.

Appetite for risk shrunk this month as cash holdings jumped to 5.2 per cent of portfolios from 4.9 per cent in November and there appeared to be growing concern for China's economic growth in 2016. A net 43 per cent of regional fund managers expect the economy to weaken next year, up sharply from a net 4 per cent last month.

Meanwhile, a net 29 per cent of asset allocators are in the underweight camp for commodities, up from a net 23 per cent in November. This echoes recent research by Lloyds Bank Private Banking, which identified commodities as the worst performing asset class of 2015, with actual market performance down 40 per cent year-on-year.

The fund manager survey, which was conducted from 4 to 10 December, also highlighted Europe and Japan as the favourite regions to overweight in 2016, with investors boosting underweight US equity positions.

“The strong dollar view is writ large across all asset, regional and sector allocations. It will take a very dovish Fed and weak US earnings to reverse the strong dollar view in 2016,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.