Hedge Funds Short Euro As Italy Weighs On EU

Hedge Funds Short Euro As Italy Weighs On EU

Hedge funds turned once again to the ‘safe haven’ currency, the Swiss franc, while losing their long interest in the euro, according to BAML’s analysis.

Large speculators are now positioned in a net short zone in the euro, reversing their net long stance held in the second-last week of February, accroding to data from CFTC. However, investors still maintain a huge euro position, even now speculative CFTC positions in Euro make the highest percentage across all currencies.

Hedge Fund Euro Positions

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The fluctuating conditions in the euro zone has pressured hedge funds into either selling or establishing more short interest in the currency. BAML’s hedge fund clients have carried out such strong selling that the trends are the strongest since 2009. At the same time real money clients also turned to selling Euro, a currency that they were buying actively as early as two weeks ago.

Euro Selling

The unpredictable results from the forthcoming elections in Italy are weighing heavy on the currency. The Euro is now at its lowest in 3 month, and slid below 1.30 against the U.S. dollar yesterday. Investors remain more uncertain about the future of EU’s third largest economy, after no single party was able to win a clear majority in last week’s elections.

Meanwhile hedge fund short positions in Japanese Yen were increased in the last week of February.  Although the Japanese Yen rose slightly against the Euro, the appointment of Kuroda as Bank of Japan Governor essentially ensures further weakening in the Yen to to reach the desired inflation target. CHF, swiss franc, has captured a buying interest from  both hedge funds and real money clients which indicates a bullish take on the currency. Hedge funds also added to their long positions in the U.S. dollar.

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