The euro is facing a challenging start to the year, with hedge funds anticipating that the euro-to-dollar exchange rate could drop to parity or even lower in the coming months. As the euro recently reached its lowest point since November 2022, both European and U.S. leveraged funds have adjusted their euro options positions accordingly.
Data from the U.S. Depository Trust & Clearing Corporation (DTCC) showed that approximately $2.5 billion worth of euro options targeting parity or below were traded, quadrupling the average daily volume from the previous month. Concerns over European economic growth have led to a 1.5% weekly decline in the euro, ranking it near the bottom among G-10 currencies.
Strategists highlight the downside risk, especially after breaking the 1.03 level. The euro was last reported around 1.0274, having dropped over 1% to 1.0226 in the previous session. Hedge funds have been bearish on the euro since late September, while asset managers have reduced bullish bets.
