Economy
See other Economy Articles
Title: Traders ‘short’ dollar as currency loses attraction
Source:
Financial Times
URL Source: http://www.ft.com/cms/s/0/e050b72e- ... 0144feab49a.html#axzz1FrvftzUO
Published: Mar 6, 2011
Author: Peter Garnham in London
Post Date: 2011-03-06 19:31:40 by Happy Quanzaa
Keywords: Obamanomics in Action
Views: 4309
Comments: 4
Hedge funds and forex dealers are betting record amounts against the dollar, reflecting a growing belief that the US currency has lost its haven appeal and that eurozone interest rates will soon rise.
As the crisis in the Middle East has worsened, the latest exchange data show that traders are selling “short” the currency. The big US fiscal deficit and concerns about the effect of rising oil prices have been blamed by some for the dollar’s slide.
Figures from the Chicago Mercantile Exchange, which are often used as a proxy for hedge fund activity, showed that short dollar positions surged from 200,564 contracts in the week ending February 22 to 281,088 on March 1.
This meant that the value of bets against the dollar on the CME rose $11.5bn in the week to March 1 to $39bn, $3bn more than the previous record of $36bn in 2007.
In contrast, speculators have added to their euro holdings amid expectations that the European Central Bank will soon raise interest rates to head off rising inflation.
Jean-Claude Trichet, ECB president, said last week that “strong vigilance” was warranted, a phrase used throughout the bank’s 2005-08 rate-tightening cycle to pave the way for a rate increase at the next governing council meeting. That strengthened the market view in financial markets that the ECB could raise rates at its April meeting and the euro last week rose to a four-month high of $1.3997 against the dollar, taking its gains from a 16-week low of $1.2871 in January to nearly 9 per cent.
“Dollar bears have become a marauding horde,” said David Watt, analyst at RBC Capital Markets. Given the continued losses for the dollar this month, he said it was likely that investors had since added to their bets against the US currency, short of an “absolutely stunning” reversal in sentiment.
“We may be seeing a turn in the longer-term outlook for the dollar – for the worse,” said Kit Juckes, head of FX strategy at Société Générale. He said the US Federal Reserve was likely to react more dovishly to a supply-side inflationary shock caused by rising oil prices than other central banks.
The figures showed that speculators on the CME had raised the value of their bets that the euro would rise against the dollar to $8.8bn, the largest since January 2008, in the week to March 1.
The data confirm the sharp turnround in sentiment towards the single currency from speculative investors, who as recently as January were betting on losses for the single currency on worries over the eurozone sovereign debt crisis.
Analysts said the prospect of ECB monetary tightening was outweighing investors’ concerns over the eurozone’s fiscal problems.
Indeed, since March 1, it is likely that speculators added to their long euro positions. Beat Siegenthaler, forex strategist at UBS, said further gains for the euro against the dollar were likely given that other investors, such as pension funds and asset managers, had not yet joined short-term, leveraged investors such as hedge funds in adjusting their bets against the single currency.
“Clearly some asset managers, presumably the more speculative in orientation, joined hedge funds in putting on long euro exposure, but on a longer view, asset managers remain significantly short and private clients have not even started to turn round their bearish euro positioning,” Mr Siegenthaler said.
He said an April interest rate rise from the ECB could therefore boost the single currency as these investors turned their positions round.
“For real money investors, the ECB decision could mean more euro buying over the medium term,” he said. “Longer-term positioning still looks short the euro.”
Post Comment Private Reply Ignore Thread
Top • Page Up • Full Thread • Page Down • Bottom/Latest
Helicopter Ben seems to have been successful, at crashing the dollar.
The rat-bastard deserves to be hanging at the end of a rope.
Socialist ass-hats think "There will be no more money when the U.S. dollar has no value, until that time we can keep printing more." And yes, that IS from LF's answer to Ben Bernanke, go65, leading disfunctional and delusional socialist of the forum.
"You want me to kill THE ENEMIES of Jappos, I'll kill THE ENEMIES of Jappos, Rebs, or Sioux, or Cheyenne... For 500 bucks a month I'll kill whoever you want. But keep one thing in mind: I'd happily kill you for free." Algren, "The Last Samurai"
#2. To: Capitalist Eric (#1)
The rat-bastard deserves to be hanging at the end of a rope.
How about drug behind a pickup down a dusty country road, or maybe an aircraft carrier????
"I love the 45 caliber M1911, I respect the 9MM M9 Beretta but I only carry a CZ for my own personal protection". Quote courtesy of Lt Col John Dean Cooper, recognized as the Father of Modern Handgunning
#3. To: CZ82 (#2)
Either or...
As soon as he quits wasting oxygen, I'll be a little more satisfied.
Same for Greenspan.
Socialist ass-hats think "There will be no more money when the U.S. dollar has no value, until that time we can keep printing more." And yes, that IS from LF's answer to Ben Bernanke, go65, leading disfunctional and delusional socialist of the forum.
"You want me to kill THE ENEMIES of Jappos, I'll kill THE ENEMIES of Jappos, Rebs, or Sioux, or Cheyenne... For 500 bucks a month I'll kill whoever you want. But keep one thing in mind: I'd happily kill you for free." Algren, "The Last Samurai"
#4. To: Capitalist Eric, CZ82 (#3)
Helicopter Ben
Can y'all believe the POS's hometown brags about him? If he were from my hometown I'd never admit it.
Dedication Ceremony Saturday, March 7, in Dillon For “Ben Bernanke Interchange”
Top • Page Up • Full Thread • Page Down • Bottom/Latest
[Home] [Headlines] [Latest Articles] [Latest Comments] [Post] [Mail] [Sign-in] [Setup] [Help] [Register]