Hedge Funds Pile into Dollar Shorts Ahead of Bessent's Fiscal Plan
Hedge funds are increasing their bearish bets against the US dollar as they await more details on Treasury Secretary Scott Bessent's new fiscal plan to address rising borrowing costs.
The dollar extended its decline triggered by Bessent's August 19 decision to increase the size of buybacks for longer-dated securities 'by at least double,' leading to a wave of selling across the cash market.
Torsten Schoeneborn, London-based co-head of G-10 FX trading at Barclays Plc., said hedge fund clients have accelerated dollar selling against a backdrop of persistent dollar supply throughout August. Real-money flows have been less directional.
Pessimism over the dollar is evident in the options market, where the premium to hedge the dollar's downside over the next month relative to its upside has climbed to its highest since February.