Currency traders weigh in for US Dollar rise after hawkish Fed remark

After the Federal Reserve’s hawkish policy announcement this week strengthened expectations for higher US interest rates, currency speculators, especially hedge funds, are stocking up on options bets that the dollar will continue to rise.According to dealers, leveraged funds started purchasing dollar call options on Wednesday, which increase in value if the US dollar appreciates. As investors processed the anti-inflation remarks made by new Fed Chair Kevin Warsh, demand continued into Thursday.

According to CME Group Inc. data for Thursday, the volume of call options, which wager on a rise in the dollar relative to the pound, surged to more than five times that of puts, which wager on a decrease in the greenback.
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Positioning in dollar-yen was more balanced, while demand for dollar call options increased widely.

This could be because of worries that Japan’s Ministry of Finance will increase its intervention to protect the yen following its decline.