- Market positioning showed wagers for ECB stimulus were robust
- Standard Chartered says traders buying to unwind bearish bets
The euro rose to a one-month high after European Central Bank policy maker Ewald Nowotny said financial markets formed unrealistic expectations for increased monetary stimulus.
The single currency has gained more than 3 percent against the dollar since the interest-rate cut and extended bond-buying announced by the European Central Bank on Dec. 3 fell short of some investors’ predictions.
“It was absurd what expectations were expressed,” and this was a failing of market analysts rather than the ECB giving a false signal, Nowotny told reporters in Vienna on Wednesday. The euro was boosted by traders buying to offset bearish positions, according to Standard Chartered Plc.
The euro’s gains are "the continuation of the positioning unwind after the ECB’s underwhelming December meeting," said Eimear Daly, a currency strategist at Standard Chartered in London.
The euro advanced 0.7 percent to $1.0964 as of 10:44 a.m. New York time, reaching the strongest level since Nov. 2. It was little changed at 133.93 yen.
"There’s a risk still that, even though a lot of the short euros got shaken out last week, if we get much above $1.10 we could trigger another round of that," Marc Chandler, global head of currency strategy in New York at Brown Brothers Harriman & Co., said by phone. A short position is a bet that an asset will decline in value.
Market positioning suggests investors had expected a more robust set of monetary easing measures from the ECB last week. Hedge funds and other large speculators boosted bets on a weaker euro to the most since early May as of Dec. 1, according to the latest data from the Commodity Futures Trading Commission in Washington.
“There’s a division of opinions within the council” at the ECB, said John Hardy, head of foreign-exchange strategy at Saxo Bank A/S in Hellerup, Denmark. “It’s clear from some of the statements that there is a variety of views.”
Commodities linked to natural-resource exports rebounded Wednesday after weakness in oil and iron ore prices cut the allure of the currencies, driving the Canadian dollar to an 11-year low earlier in the week, the Australian dollar to its weakest level this month and the South African rand to an all-time low.