By Vassilis Karamanis

(Bloomberg) -- Dollar traders are paying the most on record to bet on a deeper selloff in the greenback as a volatile US political landscape triggers a rush into bearish hedges.

The premium for short-dated options that profit from a weaker US currency has widened to the highest level since Bloomberg began compiling the data in 2011. The bearish sentiment isn’t confined to the front-end — investors are the most pessimistic on the dollar’s long-term outlook since at least May 2025.

Most Read from Bloomberg

• White House Ballroom Architect Reveals New Trump-Requested Features

• NYC’s Mamdani Crushes Snow Day Hopes, But He Yearns for It Too

While the Bloomberg Dollar Spot Index edged higher on Tuesday, its drop in the previous three days is the steepest since the US tariff turbulence in April last year. Should the losses resume, as options prices suggest, the currency could hit its weakest level in four years.

“Unpredictable US politics is unambiguously dollar-negative,” said Jesper Fjarstedt, a senior analyst at Danske Bank A/S. “The developments over the past week have pushed markets to embed a renewed political risk premium.”

Gold Rally Has Room to Run on Exodus From Dollars, Amundi Says

The greenback is languishing at the bottom of the G-10 currency pile this year, pointing to a shift in the way investors view the traditional haven asset. It’s facing pressure from concern about rising US deficits, sanctions risks and trade frictions, as well as an accelerating diversification into gold and other reserve assets.

There are heavy flows behind the move, not just sentiment.

On Monday, trading volumes through the Depository Trust & Clearing Corporation hit the second highest on record, surpassed only by the selloff on April 3, 2025. On a four-day rolling average, market participation has reached an all-time high.

And the positioning is heavily one-sided. Since Thursday, roughly two-thirds of options trades in the euro and the Australian dollar have been bets on further greenback weakness.