The biggest hedge funds have decided to play against the euro. Huge wagers were discussed, for example, in early February at the "Dinner of Ideas" that was attended by representatives of market titans such as SAC Capital Advisors and Soros Fund Management.
Managers of star hedge funds discussed the possibility that the euro would fall to the level of the dollar. Back in December the euro was trading at $1.51, but on Friday it dropped to $1.35. The fund managers are not even being secretive about their positions.
It is impossible to assess the real effects of elite traders’ bearish positions. There is nothing even illegal in the hedge fund managers’ concerted actions. However, the result might be a repeat of the 2008 problem, when large hedge funds clubbed together against certain investment banks, in particular Lehman Brothers Holdings, and so accelerated their destruction. Or perhaps there will be a repetition of the famous Soros bet against the pound in 1992. During this famous deal, which according to traders helped the investor earn $1 billion, the rate of the British pound sank so low that the U.K. was forced to withdraw its currency from the European exchange rate mechanism, which made it drop even more.
Even medium-sized speculators are following the big players’ example and starting to bet against the euro.
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