The euro has started the year on a weak footing, and hedge funds are betting it could reach parity with the dollar – or fall even lower – in the coming months, according to a report by Bloomberg citing data from the Depository Trust and Clearing Corporation (DTCC).
On Thursday, leveraged funds in Europe and the US adjusted their euro options positions as the currency tumbled to its lowest level since November 2022. Approximately €2.5bn worth of euro options, with strike prices targeting parity or below, traded hands that day – nearly four times the daily average for the previous month, according to Bloomberg’s analysis of DTCC’s data.
The euro has dropped about 1.3% last week, ranking among the weakest of the Group-of-10 currencies as concerns over Europe’s economic growth and the threat of new US tariffs spooked investors. If Europe’s growth outlook worsens further, selling momentum could intensify, given the euro’s status as one of the most liquid assets in global trading.
Hedge funds have maintained bearish positions on the euro since late September, according to Commodity Futures Trading Commission (CFTC) data. Asset managers have also scaled back their bullish bets, contributing to the downward pressure.
