Hedge funds increase bearish bets against the US dollar

Hedge funds are significantly increasing bearish bets against the US dollar as investors await the full details of Treasury Secretary Scott Bessent’s fiscal plan. This shift follows a period where Bessent’s attempts to influence the bond market through large-scale bond buybacks failed to lower interest rates as intended.

Market data from the Depository Trust and Clearing Corporation (DTCC) indicates a notable imbalance, with demand for put options against the euro exceeding call options by 47% for contracts of at least $150 million. This bearish sentiment is not limited to the euro; increased volatility has also been observed in options for the Swiss franc, British pound, and Canadian dollar.

Concerns regarding US fiscal health persist, with reports noting that government spending is significantly higher than actual revenue collected. While market participants have historically responded to asset price drops by “buying the dip,” there are growing warnings regarding potential corrections in asset bubbles, particularly within the AI sector.