Hedge funds and other traders are expanding their bearish bets on the US dollar beyond the euro, to currencies including the yuan, Australian dollar, and South Korean won, as expectations mount for renewed Federal Reserve rate cuts and waning US economic exceptionalism, according to a report by Bloomberg.
While long euro positions remain a core trade – backed by optimism around European defence spending – hedge funds are actively building short-dollar positions through FX options tied to Asia-Pacific currencies. Notably, dollar-yuan option trading hit a one-month high last week, with a clear bias toward downside bets, according to data from Depository Trust & Clearing Corp.
While recent demand has surged for digital dollar-yuan put options, in parallel, traders are increasing exposure to the Korean won, betting it could mirror the Taiwan dollar’s appreciation amid supportive macro and political shifts. Australian dollar calls meanwhile, are also attracting attention, with CME data showing call volumes outpacing puts by nine-to-one — a trend Citigroup attributes largely to hedge fund demand for AUD-USD upside in shorter tenors.
Traders are steering clear of the Japanese yen, however, following its sharp declines earlier this year and lingering geopolitical uncertainty.
