Hedge funds boost bets against the euro

Date: Tuesday, July 3, 2012
Author: Reuters

Large hedge funds increased their bets against the euro last week as investors viewed the two-day European Union summit in Brussels with skepticism.

The funds boosted their short position against euro futures to $20 billion in the latest week from $17.9 billion in the previous week, according to an analysis in Hedge Fund Monitor, a report compiled by analysts with Bank of America.

Europe's common currency has been losing ground against the U.S. dollar for more than a year, and many investors remain nervous about the euro's fate as policymakers try to solve the region's debt crisis and keep the currency union together.

U.S. and European stocks rallied on Friday after news that European policymakers had agreed to recapitalize the region's ailing banks and cut borrowing costs for Italy and Spain. But stocks retreated on Monday after weak manufacturing data for the euro zone and Asia stifled sentiment.

The euro currency stood at $1.2588 in afternoon trading. In early May it traded at $1.32.

Hedge funds as a group were down 1.38 percent quarter-to date as of June 27, but still beat the benchmark S&P 500's 5.44 percent slump in that period, the report said.

The class of hedge funds called Commodity Trading Advisors, which places bets on the futures market and in commodities such as energy and metals, performed the best in the quarter to date, up 0.99 percent. Funds that track macroeconomic trends were second with a 0.46 percent uptick.

All seven hedge fund strategies beat the S&P 500, but managers with a market-neutral approach and those who specialize in going long and short on stocks performed the worst, losing 3.45 percent and 3.27 percent, respectively, the report said.