Hedge funds are stepping up bullish bets on the U.S. dollar, positioning for its rebound to extend through year-end, according to traders cited by Bloomberg.
Activity in options for December has surged, signalling expectations of further euro, yen, sterling, and New Zealand dollar weakness. The Australian dollar remains an outlier, supported by the RBA’s hawkish tone after its September hold.
“We’ve seen hedge funds looking for a tactical long-dollar play,” said Mukund Daga of Barclays, citing strong interest in dollar calls and call spreads. He added that longer-term option buying also reflects lingering scepticism toward fiat currencies.
Citigroup’s Nathan Swami said rising front-end risk reversals across G-10 currencies show a shift in sentiment, though it’s “too early to say the dollar has bottomed.”
The renewed demand follows the end of the dollar’s weakness tied to the U.S. shutdown, with pressure on rivals from France’s political turmoil, Japan’s slow BOJ tightening, and New Zealand’s rate cut.
