The acclaimed investor is shorting both in his approximately $230 million hedge fund, PSQR Management, which next month will be opening to outside investors for the first time.

The Manhattan-based fund has been operating since April 2008, when Mr. Pellegrini seeded it with $100 million of his own money. The firm claims returns of 130% since inception.

During the home-buying frenzy of 2007, as co-manager of Paulson's Credit Opportunity Funds, Mr. Pellegrini started shorting mortgage-backed securities. Other investors scoffed.

A year later, Messrs. Paulson and Pellegrini emerged the victors, pocketing about $20 billion when the subprime mortgage market collapsed.

Mr. Pellegrini left Paulson last year to start PSQR. In May, he hired former Merrill Lynch Chief International Economist Alex Patelis to serve as his firm's chief economist.

The U.S. dollar fell to a 15-month low against a basket of foreign currencies early this week, yet Messrs. Pellegrini and Patelis predict it has further to fall, according to PSQR's latest investor report and marketing materials.

“We remain fundamentally skeptical about the ability of the U.S. dollar and of U.S. dollar-denominated fixed-income assets to retain their value,” they wrote, explaining their intentions to heavily short both U.S. mortgage-backed securities and the dollar.

“We can't predict which will go down, or which will go down more, but we believe [both] will go down a lot.”