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article imageTraders, hedge funds bet nearly $8 billion on euro decline

By Chris Dade     Feb 8, 2010 in Business
As debt problems in Greece, Portugal and Spain continue to undermine the strength of the euro, traders and hedge funds have taken positions against the currency worth $7.6 billion.
The euro is currently in use in 22 states in Europe, 16 of those states being members of the 27-strong European Union.
It is also the second most traded currency in the world.
But as fears grow that the debt problems of Greece, Spain and Portugal may spread to other countries within Europe,the strength of the euro has declined.
The Irish Times notes that at one stage on Friday the euro was worth $1.3583, recovering on Monday to $1.3683.
However, as the BBC currency tracker shows, at the end of November/beginning of December the euro was trading above $1.50, its 12-month high being $1.5136.
Interestingly, despite the uncertainty, almost panic, surrounding the euro at present, at this time last year it was actually worth less than $1.30.
Nevertheless traders and hedge funds are sensing a profit opportunity and figures released by the U.S.-based Chicago Mercantile Exchange (described by the Financial Times as "a proxy of hedge fund activity") reveal that in the week to February 2 those traders and hedge funds took the biggest ever short position in the euro.
There were more than 40,000 contracts traded, at a value equating to $7.6 billion, to reach the record level of positions taken against the euro.
With Greece likely to face more strikes by workers in the public sector, beyond the one planned for Wednesday, and Spain's finance minister and deputy traveling to London to reassure bond holders that action is being taken to improve the country's creditworthiness the Irish Times reported on what Jim Reid, a strategist with Frankfurt-based Deutsche Bank, has to say about the situation.
Mr Reid noted:It seems that the market won’t rest until we get what is increasingly likely to be a European Union bailout for the peripheral nations.
If the situation in Europe receives a large sticking plaster, then this may be the catalyst for speculators to start looking elsewhere for weak targets. The UK and US would be candidates, even if we still think such an event in the US is probably more likely to be beyond 2010
Meanwhile Spain's public works minister, José Blanco, has raged against the actions of “financial speculators” and “apocalyptic commentaries” regarding the state of his country's finances.
Mr Blanco is quoted as saying during a radio interview:Nothing that is happening in the world, including the editorials of foreign newspapers, is casual or innocent
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