ChainCatcher reported, citing Jinshi, that data shows foreign exchange traders, including hedge funds, are buying options in large size. The trades are positioned around expectations that the U.S. dollar will strengthen further after the Federal Reserve delivered hawkish signals this week.
According to the report, leveraged funds began buying dollar call options on Wednesday. Demand continued into Thursday as investors digested anti-inflation comments from new Federal Reserve Chair Warsh. The activity described in the report centers on call options tied to the dollar rather than broader spot-market positioning.
Tobias Jungmann, head of foreign exchange options at Bank of America, said buying of dollar call options has been heavily concentrated in G-10 currencies. Barclays foreign exchange options trader James Swindell also said demand for dollar call options has increased significantly, especially in euro/dollar and sterling/dollar trades.