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Hedge funds are increasingly downbeat on the dollar as the prospect of renewed US-Iran talks and a possible peace deal sap the currency’s war-driven strength.Investors added to their bearish dollar trades this month through April 10, based on a proprietary trading model from Morgan Stanley.In the options market, so-called risk reversals on the Bloomberg dollar index show the premium to hedge against a stronger dollar compared with bets against a weaker greenback has narrowed this month. Options pricing also indicates a shift in the past few days in tactical dollar positioning to roughly neutral levels from the most bullish in more than a year just last month, according to a Goldman Sachs note dated April 15.“From what we’re seeing, the hedge fund community is using choppy conditions to fade the dollar, selling into strength rather than buying dips,” said Ivan Stamenovic, head of Asia Pacific Group-of-10 currency trading at Bank of America Corp in Hong Kong.The dollar’s turnaround has been swift. Bloomberg’s dollar index jumped 2.4% in March, its biggest monthly gain since July, as haven demand during the Middle East conflict bolstered demand for the world’s reserve currency.“The path to a weaker dollar is widening, not narrowing,” Morgan Stanley analysts Molly Nickolin, David Adams and Andrew Watrous wrote in a research report published on Tuesday.“A ceasefire may be positive for risk currencies in the near-term, but we think medium-term dollar weakness may be more concentrated versus major peers,” such as the euro, yen, Swiss franc, they said.The argument for more weakness is shared by a growing number of dollar watchers, including Kenneth Rogoff, who said that the greenback was “probably at least still 20% overvalued,” and was at risk of a long-term correction as a result.In an interview with Bloomberg TV, the former chief economist at the International Monetary Fund added that the war may accelerate movements by Europe and other regions to become “more independent of the dollar.”Pressure to sell the greenback began building last week after an initial two-week ceasefire was announced, triggering the biggest one-day decline in the Bloomberg dollar index in more than two months.“The hedge fund community had been waiting to sell the dollar, and the first ceasefire proved the catalyst,” said Antony Foster, head of Group-of-10 spot trading at Nomura International Plc in London.“It was one of the heaviest dollar sell days I’ve seen in a while, across most G-10 pairs in cash and options,” referring to the April 8 trading.Trading in euro-dollar call options of €100mn ($118mn) or more was 50% bigger than that of puts on Tuesday, according to data from the Depository Trust & Clearing Corp. Call options profit from euro gains, while put options rise if the dollar strengthens.“In the near term, we’re seeing fast-money accounts buying euro upside via relatively cheap option structures,” said Richard Oliver, global head of FX cash at HSBC Holdings Plc in London. “Modest de-dollarisation is becoming an increasingly important medium-term theme.”Asset manager SGMC Capital Pte in Singapore was among those who took advantage of the dollar’s gain in March to add bearish bets, according to chief executive officer Massimiliano Bondurri.“We have been using the recent dollar strength to gradually add to bearish positions, as we expect any eventual de-escalation to weaken the greenback,” he said.There’s scope for further dollar declines if a more durable truce is reached, Bondurri said, identifying preferred trades including selling the US currency against the Australian dollar, Mexican peso and Brazilian real.“FX flows have been consistent with asset managers who are quick to reduce risk and buy dollar at the start of the war, but now starting to look through it,” said Jerry Minier, global head of linear G-10 FX trading at Citigroup in London. “Many managers acknowledge that once peace is made the underlying dynamics driving a weaker dollar will return. Recent dollar weakness reflects that shift in narrative.”While there’s still uncertainty over how long the US-Iran war will last, there are increasing prospects that it may end up doing more harm than good to the dollar.“Net-net, the dollar appears to be emerging worse-off from the conflict,” JPMorgan Chase & Co analysts wrote in a client note published last week. In the medium term, the greenback might “make another run toward the year’s lows,” they said. 

Traders turned positive on the US dollar for the first time this year as war in the Middle East jolts energy costs higher and supports the currency’s status as a haven.Hedge funds, asset managers and other speculators have taken on $6.2bn worth of wagers that the dollar will strengthen as of March 17, according to Commodity Futures Trading Commission data released on Friday and compiled by Bloomberg. They’d been holding bets on a weaker currency since mid-December.It marks a shift in sentiment in the $9.5-tn-a-day foreign-exchange market in the three weeks since the US attacked Iran. Alongside higher oil prices, a Bloomberg gauge of the dollar has risen about 2% in March, on pace for its biggest monthly increase since July.Speculative traders have been pulling back from their negative bets on the dollar, according to CFTC data, after accumulating in mid-February about $22bn of wagers tied to a weaker greenback.Since then, the dollar has shown a strong sensitivity to oil, often climbing alongside the price of the commodity. Haven buying has also supported the US currency.“A shock-type event will have investors taking risk off the table in the initial stages. In this case, that means offloading short US dollar positions,” said Bipan Rai of BMO Asset Management. “There is the added appeal of liquidity and haven-ness that should help the dollar.”The CFTC’s figures offer investors a glimpse into market sentiment, showing how hedge funds and asset managers are positioned in the currency derivatives market.JPMorgan Chase & Co strategists last week turned positive on the dollar for the first time in a year and said the currency “stands out as the top defensive play across asset classes when both bonds and equities come under pressure.”Pressure is mounting on other strategists who came into 2026 with expectations that the dollar would slide as the Federal Reserve lowered interest rates. But angst that a protracted conflict could keep energy costs elevated and ignite inflation has led traders to fully erased bets on rate reductions in the US. On Friday, bond traders lifted their wagers on a Fed rate increase by October to 50%.“The war in Iran, and subsequent price surge in oil/energy markets, has blown the multiple-cut narrative to pieces and therefore accelerated the unwind in dollar shorts as traders reposition for rate hikes,” said Andrew Hazlett, a foreign-exchange trader at Monex Inc.The Bloomberg Spot Dollar Index rose 0.5% on Friday. 

Hedge funds turned the most bullish on Brent oil in six years at the outset of one of the crude market’s most volatile weeks ever.Money managers increased net-long positions on the global benchmark by 65,438 lots to 351,032 in the week ending March 10, weekly ICE Futures Europe data on futures and options show.That’s the highest since February 2020. Meanwhile, bullish bets on US oil rose to an eight-month high, data from the Commodity Futures Trading Commission show.The Iran war has brought traffic at the Strait of Hormuz, a critical chokepoint that normally carries about one-fifth of global oil supplies, to a near-halt for almost two weeks. The prolonged disruption caught market participants off guard, many of whom had expected the US-Israeli campaign to be surgical.The seismic shock to energy markets has forced major crude producers across the region to curb output as storage capacity fills, while some refiners default on contracts.In paper markets, several volatility gauges have risen to their highest since the Russian invasion of Ukraine. In response, algorithmic traders have ramped up long positions to their limits and depressed options trading as dealers roll back risk exposure.Oil producers have also flooded into the market to lock in future revenues, while consumers panic shop for hedges to protect against spiraling prices. 

Hedge funds cut bullish bets on US natural gas after forecasts for mild weather triggered the largest single-day price decline in front-month gas futures in 30 years, forcing traders with long positions to rapidly unwind those bets at a loss, reports Bloomberg.Money managers in the week leading up to February 3 decreased long-only positions on seven US benchmark Henry Hub contracts by 48,752 lots to 466,418, the lowest in about 13 months, according to weekly futures and options data from the Commodity Futures Trading Commission. They also cut short-only positions by 23,338 lots to 267,291 after the February contract rocketed to $7.46 per million British thermal units at expiration, forcing a historic short squeeze that continued into the period.Over the same time, the contract for gas delivery at the US benchmark Henry Hub in March fell by 13%, much of which was concentrated on the record 30% plunge on Feb 2. March became the front-month after the February contract expired on January 28. 

Ken Griffin’s Citadel is establishing an office in Dubai, becoming one of the last major hedge fund holdouts to set up shop in the United Arab Emirates and marking a significant win for the city’s attempts to become a hub for the industry.The $72bn firm plans to open an outpost in the emirate’s financial centre next year. The move will extend Citadel’s presence to an 18th city and comes as the world’s largest hedge funds increasingly migrate to Dubai and Abu Dhabi, amid a growing talent pool and expanding regional capital markets.“Building high-performing teams in cities with exceptional talent has been a cornerstone of our success for 35 years,” Citadel Chief Operating Officer Gerald Beeson said in a statement. The office will “offer the strong talent pool in the region compelling opportunities to grow their careers with us”, he said.The Dubai office is expected to help Citadel strengthen its around-the-clock trading capabilities and deepen relationships with companies that already have a significant presence in the Gulf.Members of its Fixed Income and Macro business, which is led by Edwin Lin, will be the first to establish a presence in the city.Griffin, the firm’s chief executive officer, has previously said any expansion decision would hinge on access to talent, not just tax perks. “Having a portfolio manager located in a low-tax jurisdiction on Zoom intermittently with a team back in London — that’s not a winning formula,” he said at an event in Doha last year.Still, the likes of Brevan Howard Asset Management and Millennium Management have set up local offices in the UAE in recent years. The influx of firms has brought in hundreds of traders and associated staff to the country, helping build a foundation for a hedge fund ecosystem.Meanwhile, both Dubai and Abu Dhabi have stepped up efforts to attract global investment firms, touting their zero personal income tax, business-friendly regulation and a timezone that connects traders in Asia, Europe and the US. Some firms are now using Gulf offices as perks to recruit and retain global talent.In all, Dubai now hosts more than 100 hedge funds. Neighboring Abu Dhabi is also expanding rapidly, with Hudson Bay Capital Management, Marshall Wace and Arini all setting up in the city over the past year.With Citadel, one of the world’s largest hedge fund employers, now entering the UAE, one prominent holdout remains: D.E. Shaw, which opened in Dubai in 2009 but later pulled out. 

China’s stock rally is set to get a boost from small investors, stoking hopes that their massive savings will fuel the next leg of the market’s blistering advance.The benchmark CSI 300 Index has been on a tear, rising 10% in August to be one of the world’s best performing equity gauges amid a liquidity driven surge. While hedge funds have been active in the market, analysts say the nation’s mom and pop investors are still in the early stages of what could be a major rotation into stocks and equity funds.China’s household deposits fell 0.7% from a record high in June to 160.9tn yuan ($23tn) in July, suggesting investors are putting their money to work. JPMorgan Chase & Co predicts around $350bn of additional savings could flow into the equity market between July 2025 and the end of next year, propelling share prices more than 20% higher.“Cash makes bull markets, and deposits shifting to stocks is going to be an important driver of this rally,” said Xu Dawei, a fund manager at Jintong Private Fund Management in Beijing. “It’s already begun and there’s no turning back.” The glut of savings is one factor pushing Wall Street banks to hike price targets for China’s major stock gauges and fuelling hopes that China’s rally which has so far defied lacklustre earnings and persistent questions about the health of the economy has further to go.Goldman Sachs Group Inc strategists pointed to excess household savings when upgrading their target for the CSI 300, with the bank now predicting a roughly 10% rise over the next 12 months. HSBC Holdings Plc cited the savings pool as potentially a “very positive catalyst” when lifting its targets for the country’s two biggest indexes.Darwin Mao, a 28-year-old tech employee in Beijing, has been eyeing a shift to the stock market since last September.Back then, a stimulus blitz by China’s central bank sent stocks zooming higher, bringing an end to a years-long selloff fuelled by fears about the economy. The CSI 300 jumped around 25% in a week, leading to a feeding frenzy among local investors. It wasn’t until this August that the index beat the highs set back then.“Stocks rallied so fast that I didn’t have time to get in,” said Mao, adding that this time he was keen not to miss out. “I took the opportunity to invest some of my spare money at the end of July and I’ve been increasing my holdings. I believe the rally will extend until the end of this year.”The CSI 300 has risen in nine of the past 10 weeks, taking its gain from this year’s low in early April to 25%. Investors have expressed confidence that authorities will keep sentiment supported before a September 3 military parade, which is set to mark the 80th anniversary of the end of World War II. China has a history of propping up its stock market ahead of major political events to project an image of stability.Some strategists, including those at Morgan Stanley, have flagged signs the market is overheating, with some technical indicators flashing overbought signals. In one example, shares of Cambricon Technologies Corp more than doubled in August, prompting the AI chip designer to warn investors that its stock price may no longer reflect fundamentals. That sent the stock tumbling on Friday.So far, the shift from savings to stocks is a trickle: The roughly 2.1tn yuan jump in non-financial deposits a proxy for liquidity in stocks, funds and trust accounts in July was just the highest since February, and not much above the seasonal average over the past decade.But analysts see the shift to equities getting a boost from a “TINA” environment for stocks, shorthand for “there is no alternative.”Bond yields are around historic lows, while real estate once the go to investment for Chinese citizens wanting to get rich hasn’t recovered from its yearslong slump. One-year fixed deposits at China’s largest banks now pay just 0.95% per year, the lowest on record.“There is a shortage of investable assets in China,” said Winnie Wu, chief China strategist at BofA Securities. “If the stock market has a clear money making effect, people will be willing to allocate more funds.”A key question is how well Chinese officials can manage market swings. Regulators and local investors have been scarred by previous periods of boom and bust, most dramatically a bubble a decade ago that wiped out more than $2tn of market value when it burst.Local broker Sinolink Securities Co has hiked margin requirements for stock traders, while some onshore mutual funds have limited the size of new orders. It is unclear whether these moves were triggered by regulatory guidance, but it’s common for Chinese officials to issue behind the scenes instructions to brokers and funds during periods of wild stock swings.Chinese media has also cautioned investors against speculation.Local investors clearly have plenty of cash to put to work, but fund managers and analysts say it will be steady rises rather than wild swings that will encourage them to stick around this time.“It’s important this time to have a slow bull market,” said Wu Xianfeng, a fund manager at Shenzhen Longteng Assets Management Co “That is the only way a shift from deposits to stocks can be sustainable.”