The U.S. dollar index is up 10 percent this year. Since June, the dollar index has risen 23 percent. Helping these gains is weakening in the euro, which is near 12-year lows as quantitative easing kicks off in the euro zone.
The surge in open interest supports the view of several analysts that the euro will will reach parity—falling to a one-to-one level with the greenback.
“We are forecasting parity,” said David Woo, currency and rates strategist at Bank of America Merrill Lynch. “The fact that we have had a big move without much new news suggests positioning is not yet crowded.”
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Open interest hit a record 158,884 on Wednesday, while the December 2015 futures hit a record of $ 102.220 per contract on the ICE Futures market.
The dollar index fell about half a percent on Thursday, putting a slight pause to gains of about 1 percent a day on Tuesday and Wednesday.
Clouston could not recall as large a jump in the past. “We’ve seen an overall increase in volatility in currency markets recently,” he said.
In addition to the recent dollar/euro moves, the Swiss bank’s unpegging of the franc to the euro and Russian central bank interest rate changes all caused massive currency movements in the last few months.
And the dollar’s bull market—the euro’s bear market—is only half over, Brown Brothers Harriman strategist Marc Chandler wrote in a Wednesday blog post.
The dollar index “is largely a speculative vehicle. Its composition is heavily weighted toward Europe. Two of our four largest trading partners—Mexico and China are not included,” he told CNBC in an email. “Thus (the large volume) reflects what we already know. The market is bullish the dollar and positions are large. It warns (that) risk of short-term corrections can be violent.”
Investors are also piling into the dollar on concerns that the Federal Reserve may raise interest rates, analysts said.
“Coupled with European QE and global economic weakness, this leaves the dollar index as the safe-haven currency of choice,” said John Caruso, senior market strategist at RJO Futures.
To be sure, market optimism for a stronger dollar could face challenges from breaking historical trends .
Analysis of dollar moves since 1986 by quantitative tool Kensho showed that as of Wednesday’s close, the index was about 2.5 standard deviations above its 200-day moving average. The probability of the index moving lower in the next week or two is 70.6 percent, while the probability of the index moving higher is 29.4 percent.
“Anecdotally I’ve never seen such consensus bullishness towards U.S. dollars,” J.C. Parets, president of Eagle Bay Capital, said in a blog post Thursday. “The actual data we look at suggests the exact same thing as we are at the most bullish sentiment levels on record while commercial hedgers, or the “smart money”, are hedging like if the Dollar is going to zero. Something’s up guys.”
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But focus on the dollar remains, with open interest totaling more than 150,000 during intraday trade on Thursday, above the average 77,250 last year.
“Obviously on the speculative side, people are trying to drive up those futures,” Clouston said of the record volumes.
DISCLOSURE: CNBC’s parent NBCUniversal is a minority investor in Kensho.