Speculators, rejecting European leaders' assurances that they are close to a framework for solving the euro zone's sovereign-debt problems, piled into pessimistic wagers that the euro will lose value, setting a new record as of Jan. 24, government data showed Friday.

Traders held a net $28.1 billion in bets against the euro, 10% more than the previous week. That represents a net 171,347 contracts, the largest position since reliable records began in 2007, according to the weekly report from the Commodity Futures Trading Commission on the commitments of traders.

This week the euro has gained against the dollar, opening at $1.28 and trading as high as $1.32 Friday. Market-watchers have described the common currency's upward move as short-covering, when traders who have sold shares short then buy shares to fulfill the transaction. But the increase in net short positions contradicts this thesis, suggesting that investors continue to wager against the euro.

The dollar, which has benefited from the uncertainty swirling around Europe's prospects, saw its market positioning rise 6% to a net $19.2 billion in optimistic bets.

Speculators pulled back from bets that the yen will continue its rising trajectory, slashing such bets by 26% to a net $7.1 billion last week, or 44,367 contracts.

In the Swiss franc, traders held a net $1.7 billion wager that the franc will decline, just 1% higher than last week, representing 12,514 contracts.

Traders felt more optimistic about the Australian and New Zealand dollars, increasing their bets in favor of those currencies by 31% for Australia and by 40% for New Zealand.

The market was less certain about its negative view on the U.K. pound. Traders held a net $3.1 billion in bets against the pound, down 23% from the previous week.

The Canadian dollar experienced the same dynamic, with investors' negative bets down 33%, at $1.9 billion. The CFTC's weekly report shows speculative investors' positions in major currencies held against the dollar. It viewed the markets as of Tuesday.

eFXnews : Speculators Set New $28.1 Billion Record In Net Euro Shorts - CFTC

A chart from SocGen’s latest Hedge Fund Watch showing that as of last week, hedge funds were short the Euro against the dollar “like never before”…
[IMG]http://av.r.ftdata.co.uk/files/2012/01/SocGenEURshort-e1327605609508.jpg[/IMG]
Make of it what you will — obviously their positions have fluctuated dramatically in the last couple of years (along with the exchange rate itself). Since January 16 the EUR/USD has rallied from below 1.27 to just above 1.31.


FT Alphaville SocGen: hedgies short euro against dollar “like never before”