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Traders 'Short' Dollar as Currency Loses Attraction
Financial Times | March 07, 2011 | 01:59 AM EST

Hedge funds and forex dealers are betting record amounts against the dollar, reflecting a growing belief that the U.S. currency has lost its haven appeal and that euro zone interest rates will soon rise.

As the crisis in the Middle East has worsened, the latest exchange data show that traders are selling “short” the currency. The big U.S. fiscal deficit and concerns about the effect of rising oil prices have been blamed by some for the dollar’s slide.

Figures from the Chicago Mercantile Exchange, which are often used as a proxy for hedge fund activity, showed that short dollar positions surged from 200,564 contracts in the week ending February 22 to 281,088 on March 1.

This meant that the value of bets against the dollar on the CME rose $11.5 billion in the week to March 1 to $39 billion, $3 billion more than the previous record of $36 billion in 2007.

In contrast, speculators have added to their euro holdings amid expectations that the European Central Bank will soon raise interest rates to head off rising inflation.

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