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Alternative Market Briefing

Hedge funds reduce bets against euro and yen

Tuesday, October 06, 2015

Komfie Manalo, Opalesque Asia:

Hedge funds have reduced their bets against the euro and the yen as the two currencies have defied the quantitative easing by the European Central bank. Data from the Commodity Futures Trading Commission (CFTC) showed that short positions against the euro fell by more than 50% when the ECB announced the bond-purchase program in January, while bets against the Japanese currency dropped to 20% of the level in June.

According to Bloomberg, hedge funds held their speculation on a weak euro and yen even as the bond-purchase programs implemented by the ECB and the Bank of Japan are normally intended to weaken their currencies.

Sean Callow, a currency strategist at Sydney-based Westpac Banking Corp. commented, "The fact that other forces have prevented the euro and yen from depreciating in a substantial and sustained way have proven to be a source of frustration for speculative investors and pressured them to trim their positions. The delay in the start of the Fed tightening has also certainly taken a bit of wind out of the sails of the dollar bulls."

Goldman Sachs Group analysts, including Robin Brooks, chief currency strategist in New York wrote in a report on Sunday that the euro and yen will weaken with the anticipated announcement of the U.S. Fed to raise interest rates in December.

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