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Over the past two months, traders have abandoned the Euro amid bets that the ECB will struggle to tighten monetary policy further in light of signs of economic deterioration.
The currency has declined
for the ninth consecutive week, marking the largest series of declines since it
was established over two decades ago. It has fallen by more than 5% against the
dollar since peaking in mid-July and is currently trading near its lowest
levels since March.
Over the past two months, traders have abandoned the Euro amid bets that the ECB will struggle to tighten monetary policy further in light of signs of economic deterioration. This view was bolstered this week when ECB President Christine Lagarde raised interest rates for the tenth time and indicated that interest rates may have peaked.
Deepak Shah, head of foreign currency options trading for the
Group of Ten at Nomura Holdings, said: “The ECB has just given dollar
bulls another reason to start shorting the euro, We’d expect to see
euro shorts to gain momentum, not just against the dollar, but against other
currencies as well.”
Hedge funds have turned more bearish on the Euro since the start
of the year and analysts have revised their year-end forecasts for the
currency. The average forecast expects the Euro to end the year at $1.09,
compared to $1.12.
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