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Alternative Market Briefing

Hedge funds are cutting bets on common currency ahead of new ECB monetary rule

Tuesday, June 03, 2014

Komfie Manalo, Opalesque Asia:

Lyxor Asset Management said hedge funds are cutting position on the common currency ahead of the European Central Bank’s adoption of expansionary measures.

Lyxor said in its newly-launched Lyxor Weekly Brief, "The market is expecting the central bank to adopt expansionary decisions. Options for the Frankfurt-based institution involve a cut of the main policy rate; a cut in the deposit rate to negative territory and the adoption of unconventional measures (outright quantitative easing, 1.26 LTRO, ABS purchases etc.). Global Macro have maintained short EUR USD positions for some time but they recently increased their shorts."

It added that both CTAs and Global Macro funds recently cut exposures to the EUR vs USD, though the former remain long EUR in net terms. This is taking place in an environment that saw the greenback rising against major currencies in May (except the JPY).

With regards to recent performance, equities rallied last week, Lyxor AM said with positive implications for equity-oriented strategies (Event Driven, L/S Equity). Meanwhile L/S Credit remained resilient, despite the 10bp rise in high yield spreads in Europe and the US in May. Convertibles and Vol. Arbitrage gave up some gains this week, as a result of shrinking equity volatility.

"Finally, as the month of M......................

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