jeudi 26 mars 2015
Here’s the reason the euro may have just hit a bottom
Posted on 16:21 by nice news
Analysts at UniCredit said Wednesday that the euro has hit its bottom. The researchers argued that the fundamentals which drove the dollar’s eight-month rally have mostly dissipated.
Vasileios Gkionakis, head of global FX strategy at UniCredit in London, said that the dollar‘s rally has recently been driven by speculators piling into the trade, not by higher real interest rates in the U.S., which served as the rally’s catalyst.
Gkionakis’s reasoning is illustrated by the chart below. This sudden run-up in the dollar’s value was a boon for hedge funds, which have garnered a substantial portion of their profits over the last eight months from shorting the euro, according to an analysis of the HFRXM index, which tracks the performance of global hedge-fund managers.
But a sudden quickening of the eurozone’s economic recovery has already triggered several bouts of painful short-covering, which likely has already sent the fast money searching for the next trade.
“We have to take into account that the hedge fund community has made a lot of money being short the euro,” Gkionakis said. “But at some stage, people say it’s time to lock in profits and start looking elsewhere.”
Vasileios Gkionakis, head of global FX strategy at UniCredit in London, said that the dollar‘s rally has recently been driven by speculators piling into the trade, not by higher real interest rates in the U.S., which served as the rally’s catalyst.
Gkionakis’s reasoning is illustrated by the chart below. This sudden run-up in the dollar’s value was a boon for hedge funds, which have garnered a substantial portion of their profits over the last eight months from shorting the euro, according to an analysis of the HFRXM index, which tracks the performance of global hedge-fund managers.
But a sudden quickening of the eurozone’s economic recovery has already triggered several bouts of painful short-covering, which likely has already sent the fast money searching for the next trade.
“We have to take into account that the hedge fund community has made a lot of money being short the euro,” Gkionakis said. “But at some stage, people say it’s time to lock in profits and start looking elsewhere.”
Here’s the reason the euro may have just hit a bottom
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