Monday, February 8, 2010

$8 Billion Bet Against the Euro

Traders and hedge funds have bet nearly $8 billion against the euro, amassing the biggest short position in the euro ever, reports FT.

Investors increased their short positions against the euro to record levels in the week ending February 2, according to the latest figures from the Chicago Merc.

The build-up in net short positions represents more than 40,000 contracts traded against the euro, equivalent to positions worth $7.6 billion.

This kind of size suggests that there are major players involved, hedge funds and the like.

However, it is not clear to me that shorting the euro is the way to play the European debt crisis. If the EU bends and decides to print euros to bailout the PIIGS, then this is a great trade. In my mind, it is difficult to see how Germany would be willing to lead the strong EU members in a mass bailout of the PIIGS. That said, given the non-printing of money by the Fed, dollar strength versus the euro is likely anyway, but not because of the crisis.

The crisis environment, however, will make traders nervous and add fuel to dollar strength.

1 comment:

  1. From the desk of the Aztec Adventurer:- Interesting. So let me get this straight: the same gang of financiers, investors and speculators who brought America to its knees is now trying to do the same thing to Europe. Ah, so now we know who our true masters are!