As investors await more clarity on Treasury Secretary Scott Bessent's fiscal roadmap to tackle the highest borrowing costs in years, hedge funds are ramping up bearish positions against the dollar.

The pressure came to a head last Friday when Bessent's decision on August 19 to "at least double" the repurchase scale of longer-dated Treasuries triggered a further slide in the greenback. This move led to the dollar's sharpest single-day drop in nearly three weeks, sparking a wave of selling in the spot market.

The dollar remained little changed during Monday's Asian trading session. Torsten Schoeneborn, co-head of G-10 currency trading at Barclays in London, noted on Friday that the reaction from hedge fund clients was especially pronounced in linear FX trading, adding to the selling pressure that has persistently weighed on the dollar since August.

Bessent's aggressive measures to curb rising US borrowing costs have led some investors to believe the dollar will ultimately bear the consequences. They anticipate that if the Treasury shifts toward more proactive yield management, it could erode confidence in the currency.

Options markets equally reflect a bearish outlook on the dollar. According to one metric, the premium investors are paying for protection against a dollar decline over the next month, compared to hedging against an advance, has climbed to its highest level since February.

Akshay Saxena, head of Asian FX options trading at Citi in Singapore, said that since the Treasury announced its buyback program, there has been broader demand for hedging downside risks in the FX options market.