Foreign exchange traders are increasing hedging to prevent the dollar from rising further before Federal Reserve Chairman Kevin Walsh will deliver an important speech at the Jackson Hole seminar on Friday. US Treasury Secretary Scott Bessent unexpectedly took steps last week to support the bond market and thus dampen sentiment in the dollar market. Since then, the dollar has recovered half of its decline. Options capital flows and market positions indicate that traders are preventing the dollar from continuing to rebound. They hedged in response to Walsh's speech that might send hawkish signals or to reaffirm their view that the Federal Reserve should focus on monetary policy and not get involved in fiscal matters. According to CME data, 57.2% of the dollar options capital flow so far this week can benefit from the strengthening of the US dollar against a basket of major currencies, up from 43.2% last week. Meanwhile, the risk reversal indicator — an indicator that measures positions and sentiment in the options market — shows that the market's bearishness on the US dollar has weakened, and the negative trend has been reduced by about half. Francesco Pesole, forex strategist at ING Groep NV, said that this “may be a key turning point in the foreign exchange market, and the market may be unwilling to establish too many short positions in the US dollar.”

Foreign exchange traders are increasing hedging to prevent the dollar from rising further before Federal Reserve Chairman Kevin Walsh will deliver an important speech at the Jackson Hole seminar on Friday. US Treasury Secretary Scott Bessent unexpectedly took steps last week to support the bond market and thus dampen sentiment in the dollar market. Since then, the dollar has recovered half of its decline. Options capital flows and market positions indicate that traders are preventing the dollar from continuing to rebound. They hedged in response to Walsh's speech that might send hawkish signals or to reaffirm their view that the Federal Reserve should focus on monetary policy and not get involved in fiscal matters. According to CME data, 57.2% of the dollar options capital flow so far this week can benefit from the strengthening of the US dollar against a basket of major currencies, up from 43.2% last week. Meanwhile, the risk reversal indicator — an indicator that measures positions and sentiment in the options market — shows that the market's bearishness on the US dollar has weakened, and the negative trend has been reduced by about half. Francesco Pesole, forex strategist at ING Groep NV, said that this “may be a key turning point in the foreign exchange market, and the market may be unwilling to establish too many short positions in the US dollar.”