News Digest:

Hedge funds are increasingly betting that the euro could reach parity with the dollar—or fall even lower—in the coming months, according to Bloomberg, citing data from the Depository Trust and Clearing Corporation (DTCC).

As the euro tumbled to its lowest level since November 2022, leveraged funds in Europe and the US adjusted their options positions on Thursday. Approximately €2.5 billion worth of euro options, targeting parity or below, traded that day—nearly four times the daily average for the previous month, highlighting heightened market activity.

The euro declined 1.3% at the end of Dec ’24 week, making it one of the weakest currencies among the Group-of-10. Concerns over Europe’s economic growth and potential new US tariffs have spooked investors. If the economic outlook deteriorates further, the euro could face intensified selling pressure, given its status as a highly liquid global trading asset.

Hedge funds have held bearish positions on the euro since late September, as per Commodity Futures Trading Commission (CFTC) data. Asset managers have also reduced their bullish bets, adding to the currency’s downward momentum. With these factors at play, the euro’s trajectory remains under close scrutiny by global investors.

End Notes

Source: https://www.hedgeweek.com/hedge-funds-target-euro-dollar-parity-as-options-activity-surges/