Options positioning shows traders preparing for a stronger greenback if the central bank chief sounds hawkish.
Currency traders are increasing hedges for further dollar gains ahead of Federal Reserve Chair Kevin Warsh’s speech at the Jackson Hole symposium on Friday, Bloomberg reported.
The dollar has recovered half of its losses since Treasury Secretary Scott Bessent’s move last week to support the bond market. Options flows and positioning show traders guarding against a continued rebound if Warsh sounds hawkish or reiterates that the Fed should focus on monetary policy.
CME Group data shows 57.2% of dollar options flows this week would benefit from a stronger greenback against major peers, up from 43.2% last week. Risk reversals have also become less bearish.
One-week euro-dollar volatility stood at 4.69%, below its year-to-date average, while volatility rose about 30% over the past 10 trading sessions as traders positioned for a possible surprise from Warsh.
