$1.3 Trillion Euro-Dollar Market Turning to Draghi for Cues

  • Traders say ECB has overtaken Fed as exchange-rate driver
  • Euro is most popular currency short, Barclays survey shows

Traders in the almost $1.3 trillion-a-day euro-dollar market have started to take their cues from Mario Draghi rather than Janet Yellen, according to Barclays Plc.

About half of respondents to a Barclays survey said European Central Bank policy is the most important driver of the euro-dollar exchange rate this quarter. That’s up from approximately 30 percent in September. The ECB bumped U.S. Federal Reserve policy from first place, as about 30 percent of participants called the Fed the most important determinant for the currency pair, down from more than 40 percent in a poll published Sept. 15.

Barclays Global Marco Survey

Draghi, president of the ECB since 2011, suggested on Oct. 22 that the central bank may carry out additional stimulus measures, which typically depress currencies. That contrasts with the U.S., where the greenback has rallied on speculation that the Fed is moving closer to raising interest rates.

“Investors remain bearish on euro-dollar, but there has been a clear shift in terms of its drivers, with more thinking it will be driven by ECB easing rather than Fed tightening,” Guillermo Felices, head of asset allocation in Europe at Barclays, said in a note Nov. 3. The London-based bank is the world’s third-biggest foreign exchange trader, according to a Euromoney survey.

The survey is based on responses from 651 Barclays clients, including hedge funds, money managers and traders, from Oct. 22 to Oct. 29.

More than 60 percent of survey respondents cited the dollar as their favorite bullish bet, while almost half called the euro their favorite bearish position. The currency pair accounts for almost a quarter of the $5.3 trillion traded each day in the foreign-exchange market.

The single currency rose 0.1 percent to $1.0878 as of 7:58 a.m. in New York on Thursday, after touching the lowest level in more than three months. The euro has fallen about 10 percent against the dollar this year.

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