8 Feb 2010 11:48am
Speculators build record bets against euro
By Peter Garnham
Currency speculators have increased their bets against the euro to the
highest level since the creation of the single currency.
Figures from the Chicago Mercantile Exchange, often used as a proxy of
hedge fund activity, showed investors increased their bets against the
single currency to record levels in the week to February 2.
Data showed net short positions against the euro rose from 39,500
contracts to 43,700 contracts, equivalent to $7.6bn. This surpassed
the levels of bets against the euro seen in September 2008, when
investors abandoned the single currency as haven demand for the dollar
surged in the wake of the collapse of Lehman Brothers.
The news came as the euro dropped to a series of multi-month lows
against the dollar, culminating last Friday when the single currency
fell to an eight-month trough of $1.3583.
Analysts said sentiment towards the euro had soured amid increasing
concerns over the fiscal problems in Greece, which had spread to
encompass worries over other countries on the periphery of the
eurozone sporting large fiscal deficits and high labour costs, and
even the very existence of the single currency.
Thomas Stolper at Goldman Sachs said the drop in sentiment towards the
euro reflected not merely worries over Greece, but were symptomatic of
broader concerns over European sovereign debt sustainability and
European monetary union.
He said the small size of the Greek economy, which represents about 3
per cent of eurozone gross domestic product, meant that its direct
significance was not the real issue.
“We think it is rather more likely than not that Greece will obtain
some form of fiscal support from the rest of the eurozone or otherwise
risk default,” said Mr Stolper.
“But behind this intense focus on Greece obviously is the
long-standing unresolved issue of how to enforce fiscal discipline in
a currency union of sovereign states.”
Markets Data: © Thomson Reuters
Market data delayed by at least 20 minutes.
©The Financial Times Ltd 2010