Hedge Funds Euro Bets

Hedge Funds Euro Bets

Several Hedge Funds Betting Big Against the Euro

Several large hedge funds are placing major bearish bets against the euro.  The funds have been meeting at exclusive meetings where the future of the euro has been discussed.  Hans Hufschmid, a hedge fund administrator, says "This is an opportunity...to make a lot of money."
...a small group of all-star hedge-fund managers argued that the euro is likely to fall to "parity"—or equal on an exchange basis—with the dollar, people close to the situation say.

George Soros, head of the $27-billion asset fund manager, warned publicly last weekend that if the European Union doesn't fix its finances, "the euro may fall apart."

The currency wagers signal that big financial players spot a rare trading opening driven by broader market gyrations. The euro, which traded at $1.51 in December, now trades around $1.35. With traders using leverage—often borrowing 20 times the size of their bet, accentuating gains and losses—a euro move to $1 could represent a career trade. If investors put up $5 million to make a $100 million trade, a 5% price move in the right direction doubles their initial investment.

It is impossible to calculate the precise effect of the elite traders' bearish bets, but they have added to the selling pressure on the currency—and thus to the pressure on the European Union to stem the Greek debt crisis.  Source

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