FX Traders Add Two-Way Dollar Hedges Ahead of Fed Chair Warsh's Jackson Hole Speech

Dollar trading is heading into a high-stakes week with few investors willing to run big one-way bets. Currency desks are increasing hedges ahead of Federal Reserve Chair Kevin Warsh's speech at the Kansas City Fed's annual Jackson Hole Economic Policy Symposium on Aug. 28, an event FX strategists see as a major potential catalyst for both bond and currency markets. Bank of America strategists say the dollar is "on edge" into Jackson Hole, pointing to a partial reduction in long-dollar exposure as traders pare back directional positioning. This year's symposium carries extra weight. It will be Warsh's first major public address since becoming Fed chair in May 2026, and he has offered few clues about where he intends to take policy. Warsh has signaled less reliance on forward guidance, the Fed's traditional tool for steering market expectations, and has suggested a preference for longer-term policy framing over meeting-by-meeting hints. Historical analysis of Jackson Hole speeches since 1998 shows the sessions that coincide with a Fed chair's remarks often produce above-average daily swings in major currency pairs. Markets already got a preview of the current uncertainty at the July 2026 FOMC meeting. The Fed held rates unchanged in a 3.50% to 3.75% target range, with three officials dissenting in favor of a hike. Inflation remains the central complication. The latest PCE price index, the Fed's preferred inflation measure, rose 3.7% year over year, close to double the 2% target. Inflation has now run above 2% for 65 straight months. Positioning suggests caution rather than an outright shift to bearish dollar bets. Instead of flipping short, traders appear to be trimming existing bullish exposure while adding options structures that protect against sharp moves in either direction. In options markets, that typically shows up as stronger demand for straddles and strangles in major dollar pairs, strategies designed to benefit from large swings regardless of direction. The sensitivity is not limited to FX. Treasury markets are also braced for volatility, with yields likely to move sharply depending on any policy signals embedded in Warsh's remarks.