Source: Jin10 Data

Since the beginning of this year, speculators have been oscillating between call and put options on the usd, but on the eve of the US presidential election, they made the largest adjustment in three years.

In the second week of October, hedge funds and asset management companies significantly reduced their short usd positions, that is, put bets on the usd, by about 8 billion USD.Futures Trading Commission (CFTC)'s latest data shows that investors are significantly reducing their net short positions in US soybean, corn, and wheat contracts, easing bearish sentiment in the market.The latest data released by the Commodity Futures Trading Commission (CFTC) shows that the net positive fluctuation of this trade is the largest since the most severe period of the pandemic in 2021.

At the beginning of this month, these derivatives traders also held over 13 billion USD in put bets on the usd, while now the bullish and bearish bets on the usd are actually balanced.

Mark McCormick, Head of Global Foreign Exchange and Emerging Markets Strategy at TD Securities, wrote in a report on Monday, 'With only a few weeks left until the election, the market can no longer ignore the risks brought by the US election.' He added, 'This is a binary outcome, with significant tail risks for the market, and I advocate holding the usd.'

The Bloomberg usd index has risen by about 2.8% so far in October, poised to achieve its best monthly performance in two years.

The cost of hedging the rise in the US dollar reflects traders' renewed interest in a bullish position on the dollar. Over the past month, the price of bullish options on the US dollar basket for the next 30 days has risen significantly compared to bearish options, now reaching the highest point since July.

Citigroup group stated that fixed income traders are hedging election risks by reducing exposures across investment portfolios and asset classes (from interest rates to forex). Strategists Dirk Willer and Yasmin Younes of the bank recently noted in a report that, compared to 2020, currencies such as the Euro, as well as the Mexican Peso and Chilean Peso, are expected to drop further in the days leading up to the election.

They added that short-term traders have been buying the US dollar and reducing their duration, although some profit-taking actions related to bets on Trump winning the presidency instead of Vice President Harris may occur before election day.

These strategists stated, "Due to the unpredictability of the election results, we are entering a period of great uncertainty. We believe that for trades susceptible to election impacts, portfolio adjustments and risk mitigation will be potential short-term driving factors for the market."

However, BlackRock CEO Larry Fink mentioned that the upcoming US election results are truly inconsequential for financial markets. Fink stated on Monday at a meeting hosted by the Securities Industry and Financial Markets Association in the USA, "I'm tired of hearing people say that this is the most important election of your life. The reality is, it's not important over time."

Fink added, "Unfortunately, people focus too much on market fluctuations at any time or quarter, which is not really significant." However, he pointed out, "We have worked with two administrations and are in dialogue with both presidential candidates."

Editor / jayden