The net amount of investor cash betting the euro would rise dropped 21% in the past week, government data showed Friday.
As of Feb. 19, investors reduced their net long-euro positions to $3.2 billion, down from $4.1 billion in the previous week, according to the Commodity Futures Trading Commission's weekly report on the commitments of traders.
Investors pulled back on their pro-euro bets after poor economic data from the euro zone pointed to a fragile recovery for the currency bloc. Data last week showed the euro-zone economy plunged deeper into recession in the fourth quarter, shrinking 0.6% between October and December. This was the euro-zone economy's sharpest contraction in nearly four years.
Euro-zone industrial production in the fourth quarter, released Feb. 13, also showed a 2.4% contraction from the previous quarter, its worst reading in three years.
The weak data heightened speculation that the European Central Bank may cut interest rates later this year to stimulate the region's economy. A lower interest rate would hurt the euro because it reduces the appeal of euro-denominated assets.
Meanwhile, investors added to their bets that the yen would drop against the dollar. The net yen short position rose 7.4% last week to $8.8 billion.
The Japanese economy shrank for the third consecutive quarter in the October-December period, according to data released Feb. 14. The poor growth reading reinforced expectations that the Bank of Japan would use aggressive monetary easing measures to boost the economy and pull Japan out of its deflationary spiral.
Investors also pared back bets that the Australian dollar would rise. The net Australian dollar long position fell 18% last week to $4.5 billion.
Overall, investors decreased their net short-dollar positions to $630 million, down 87% from the previous week.
The report tracks the movements of speculators on the Chicago Mercantile Exchange. Although a small part of the global currency markets, these investors' positions are considered indicators of trading among investors like hedge funds. The CFTC's weekly report shows investors' open positions in futures contracts in major currencies held against the dollar.
Write to Nicole Hong at [email protected]
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