Record Euro Bearish Bets Signal Two-Week Rally Vulnerable

(Bloomberg) — The euro is capped against the dollar after a two-week rally as Greece’s funding concerns and the European Central Bank’s aggressive monetary easing contrast with the Federal Reserve’s path toward higher interest rates.

The shared currency has fallen against 14 of its 16 major peers this year as the ECB carries out an unprecedented plan to buy 1.1 trillion euros ($ 1.2 trillion) of bonds to support the economy and stave off deflation. Speculators placed record bets on declines in the euro with the currency dropping for an unprecedented ninth month as Greece strives to persuade creditors to accept proposed reforms and release further aid.

More from Greek Markets Show All at Risk Should Mistake Trigger a Default

“The Greek question still has the potential to roil the EUR,” Sam Tuck, a currency strategist, wrote in an ANZ Bank New Zealand Ltd., wrote in a report to clients dated March 30. “The USD is in a cyclical bull market. Markets have converged on June/September as the timing of the first hike and USD will continue to rally into this move.”

The euro was little changed at $ 1.0883 as of 8:36 a.m. in Tokyo, after completing a two-week gain on March 27. It traded at 129.84 yen from 129.73 in New York.

Hedge funds and other large speculators pushed net bearish positions on the euro to a record-high in the week to March 24. They rose to 220,963 contracts, up from 193,774 in the previous period, according to data from the Washington-based Commodity Futures Trading Commission.

More from Australia Stocks Slip as Oil Retreats; Dollar Holds Gains

Greece’s Prime Minister Alexis Tsipras will update lawmakers Monday on talks held over the weekend in Brussels between Greek government officials and representatives of the country’s creditors to secure more funds from the euro area and stave off fiscal collapse.

Dollar Strength

The Bloomberg Dollar Spot Index has advanced 1.6 percent in March to 1,191.55, pushing its climb this year to 5.4 percent. The nine months of gains would extend what is already the longest monthly streak in data going back to 2004.

More from Japan’s Output Slumps in February, Adding to Signs of Weakness

After the Fed tempered market expectations for a mid-year interest-rate increase earlier this month, sending the dollar to its biggest weekly decline since 2011, traders refocused on the direction of monetary tightening the U.S. central bank is pursuing, while other monetary authorities globally eased.

Fed Chair Janet Yellen said Friday she expects rates to rise this year. ECB President Mario Draghi said last week he’s confident Europe’s bond buying program will hit its targets in the first month of operation.

“The euro may find a floor around $ 1.08 and trade in a narrow range while traders watch U.S. data,” said Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., a margin-trading-services provider, wrote in a note to clients.

To contact the reporter on this story: Chikako Mogi in Tokyo at [email protected]

To contact the editors responsible for this story: Garfield Reynolds at [email protected] Naoto Hosoda

More from

  • Record Euro Bearish Bets Signal Two-Week Rally Vulnerable
  • Duke Joins Michigan State in Men’s Basketball Final Four
  • Oil Drops for Second Day as Iran Nuclear Talks Remain Deadlocked

Leave a Reply

Your email address will not be published. Required fields are marked *