1 week ago

Hedge Funds Increase Dollar Shorts Ahead of Bessent Fiscal Plan

Hedge Funds Ramp Up Dollar Shorts Ahead of Bessent’s Fiscal Plan · livemint.com

Hedge funds are investors that are betting the US dollar will lose value.

They increased these bets while waiting for more details about Treasury Secretary Scott Bessent’s fiscal plan.

Bessent said the Treasury would at least double its purchases of longer-term government securities.

After that announcement, the dollar had one of its biggest daily drops in nearly three weeks.

Traders also bought more options that protect against the dollar falling.

Interest in these options was especially strong for the Swiss franc, euro, British pound and Canadian dollar.

In Asia, traders focused on short-term options involving the Korean won, Thai baht and Singapore dollar.

The dollar changed little in Asian trading on Monday after its recent decline.

Key facts

Fiscal-plan announcement: On Aug. 19, Scott Bessent announced that buybacks for longer-dated securities would increase by at least double.
Dollar reaction: The announcement preceded the dollar’s worst single-day decline in nearly three weeks.
Hedge-fund activity: Barclays said dollar selling accelerated among hedge-fund clients in its linear trading business.
Options hedging: The premium for protecting against dollar downside over the next month reached its highest level since February, according to a Bloomberg gauge.
Put-versus-call demand: Demand for dollar puts against the euro was 47% greater than demand for dollar calls on Aug. 21 for contracts worth at least $150 million.
Regional focus: Asian trading demand concentrated on short-dated options involving the Korean won, Thai baht and Singapore dollar.
Volatility: One-month Swiss franc implied volatility rose to an over-two-week high, while comparable measures for the euro, sterling and Canadian dollar also increased.

livemint.com · 1 week ago