Futures Traders Erase Bets for Euro Drop Against U.S. Dollar

Futures traders reversed bets that the euro will decline against the dollar, wagering for the first time since August 2011 that the shared currency will gain, figures from the Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop, so-called net longs, was 5,126 on Jan. 1, compared with net shorts of 2,549 a week earlier. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of Tuesday.

The euro halted a two-year losing streak versus the greenback in 2012 as European Central Bank President Mario Draghi’s commitment to backstop the shared currency stymied the debt-contagion threat. The shared currency rose 1.8 percent in 2012, after sliding almost 10 percent during the prior two years, aided by a 2.6 percent gain in the fourth quarter.

The dollar fell from a three-week high versus the euro today after data showed the U.S. unemployment rate was higher than forecast in December, fueling bets the Federal Reserve won’t end its stimulus efforts any time soon. The euro rose earlier after minutes of the Fed’s last meeting showed yesterday the central bank might end its third round of monthly bond purchases under quantitative easing this year. The shared currency gained 0.2 percent to $1.3074.

Futures are agreements to buy or sell assets at a set price and date. Each Friday the CFTC publishes aggregate numbers for long and short positions for speculators such as hedge funds and institutional investors that buy or sell futures to protect against price moves. Analysts and investors follow changes in speculators’ positions because such transactions can reflect an expectation of a change in prices.

To contact the reporter on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net