Futures traders are betting on a decline in the euro versus the dollar for the first time in seven weeks on concern growth in the euro region may slow and Italian elections will lead to a renewal of turmoil.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain, the so-called net shorts, was 9,394 contracts in the week ended Feb. 26, Commodity Futures Trading Commission data show. There were 19,103 net-long contracts a week earlier.
European Central Bank President Mario Draghi’s comments on Feb. 7 that the euro’s recent strength may cause a slowdown in inflation were a turning point for the shared currency, according to Brian Kim, a foreign-exchange strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut. Draghi said in January the European economy should gradually recover. Wagers on a euro gain declined in the weeks ended Feb. 15 and Feb. 22.
Pier Luigi Bersani, the pre-Italian election favorite and Democratic Party leader, won Italy’s lower house by less than a half a percentage point this week, while ex-Premier Silvio Berlusconi gained a blocking minority in the Senate after the Feb. 24-25 vote.
“Draghi probably got the market a little too excited in January and had to temper enthusiasm in February,” Kim said in a telephone interview. “The net-short position also captures concern around the Italian election.”
The 17-nation currency weakened 0.3 percent to $1.3022 at 5 p.m. in New York after earlier falling to $1.2967, its lowest level since Dec. 11.
The euro fell 1.8 percent over the past month, the second-worst performer after Norway’s krone among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 3.5 percent.