Monday, December 14, 2009

Traders Bet on Euro Drop Versus Dollar, First Time Since April

By Candice Zachariahs

Dec. 14 (Bloomberg) -- Futures traders are betting that the euro will fall against the dollar for the first time in seven months, figures from the Washington-based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 511 on Dec. 8, compared with net longs of 22,151 a week earlier. That’s the first time since April 28 that short bets outnumbered longs.

The dollar has gained for the past two weeks after a Dec. 4 report showed that U.S. employers cut the fewest jobs in November since the recession began and unemployment unexpectedly fell, prompting traders to bet that the Federal Reserve will bring forward interest-rate increases. Retail sales and consumer confidence in the U.S. increased more than forecast, separate reports showed Dec. 11.

“Investor sentiment is turning away from the euro and tending to become less opposed to the dollar,” said Gareth Berry, a Singapore-based currency analyst at UBS AG. “It’s difficult to know for sure if it’s made a decisive switch, but certainly the correlation with risk appetite and the dollar has been loosening.”

The euro traded at $1.4634 as of 12:01 p.m. in Tokyo from $1.4615 on Dec. 11 when it declined to $1.4586, the weakest level since Oct. 5.

The euro will fall to $1.45 in one month and $1.40 in three months, UBS forecasts.

Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of Tuesday.

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