Karishma Vanjani

Bets in the options market that the dollar will keep falling are increasing even as the currency has reached its lowest intraday value in more than three years.

On Thursday, the U.S. dollar index, which tracks the currency against a basket of peers, hit 97.60, the lowest intraday level since March 2022. The dollar has fallen 10% this year as expectations for U.S. economic growth have worsened and the nation's relationships, especially with its allies, have appeared to weaken.

Inflows of foreign money into the U.S. economy are critical to maintaining the position and power of the U.S. dollar. Market moves show investors are seeking to protect themselves against the possibility the dollar will fall further. A so-called risk reversal index comparing demand for three-month call options with demand for puts fell to negative 0.31 percentage point on Thursday from negative 0.24 point on Wednesday.

That shows a growing preference for put options, indicating expectations for a declining dollar. Call options give the holder the right to buy an asset at a set price, while puts provide the right to sell.

The one-month risk reversal has taken a bigger dive to negative 0.36 point from negative 0.21 point earlier.

The more hedges market participants employ against a weaker dollar, the lower the risk-reversal indexes go. The monthly value turned negative in April, the month when President Donald Trump unveiled 10% tariffs on all imports, plus higher levies on dozens of countries.

The latest surge of interest in puts comes after Trump said he could impose unilateral tariffs on U.S. trading partners if new agreements aren't reached by July 9.

The nation is also reviewing a multibillion-dollar defense project with Britain and Australia, an additional risk to flows of foreign money into the U.S., according to George Saravelos, global head of foreign-exchange research at Deutsche Bank.

To be sure, April and May ended with values near negative 0.4 point, meaning investors have been more bearish recently. The dollar weakness may not be only about U.S. policies; part of the story may well be that opportunities outside of the U.S. are more attractive now.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com.

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June 12, 2025 14:49 ET (18:49 GMT)

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