Hawkish signals from the Federal Reserve ignite a bullish frenzy for the US dollar as the options market bets fully on the rate hike cycle

Golden Ten Data reported on June 19 that data shows foreign exchange traders, including hedge funds, are buying large amounts of options to bet on a stronger US dollar after the Federal Reserve sends out hawkish signals this week and reinforces expectations for US rate hikes. According to traders, leveraged funds began purchasing US dollar call options on Wednesday, which will appreciate in value if the US dollar rises. As investors digested the new Federal Reserve Chair Walsh’s anti-inflation remarks, this demand continued into Thursday. Tobias Jungmann, Head of Americas FX Options at Bank of America, stated: “We are seeing large-scale buying of US dollar call options, mainly concentrated in G-10 currencies. Given the current low implied volatility, building long US dollar positions via options looks very attractive.” James Swindell, Senior FX Options Trader at Barclays in London, said: “We are witnessing broad and significant demand for US dollar call options, especially in EUR/USD and GBP/USD.”