Hedge Funds Boost Bearish Dollar Trades as Index Drops 1.9% in April
Hedge funds added bearish dollar positions through April 10, with options risk reversals narrowing to February 27 levels as bullish premiums dropped to neutral. The dollar index jumped 2.4% in March then fell 1.9% in April after a US-Iran ceasefire extension, triggering its longest eight-day slump since June 2020.
1. Hedge Funds Ramp Up Bearish Positions
Hedge funds increased their bearish dollar bets through April 10 based on Morgan Stanley’s proprietary trading model, narrowing options risk reversals on the dollar index to levels last seen on February 27. This shift marks a move from the most bullish positioning in over a year to near-neutral premiums as investors sell into dollar strength.
2. Dollar Index Volatility After Ceasefire Extension
The dollar index posted its largest monthly gain since July by rising 2.4% in March before dropping 1.9% in April, including an eight-day losing streak—the longest since June 2020—following news of a two-week ceasefire extension between the US and Iran. This rapid reversal highlights fading haven demand and broadening expectations of medium-term dollar weakness against major peers.