Hedge funds are betting on a stronger U.S. dollar due to global currency weakness and shifting monetary policies.

Hedge funds are boosting bets on a U.S. dollar rally by purchasing options, driven by expectations of a year-end rebound amid weakening euro, yen, and other major currencies. Increased activity in call options and call spreads reflects growing confidence in the dollar’s strength, fueled by political instability in France, cautious monetary policy in Japan, and a recent rate cut in New Zealand. While the Australian dollar remains resilient due to a hawkish central bank, analysts caution it’s too early to confirm a dollar bottom, though rising risk reversals and a 2% gain in the dollar index suggest shifting sentiment.