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Phil Albinus
Phil Albinus
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Hedge Funds Bail On Hobbled Euro

What a birthday. On the 10th anniversary of the euro, hedge funds across the globe gave their verdict on the troubled currency that covers most of Europe: Short it!

According to the New York Post, hedge funds "beefed up their bets against the euro to a record level in the last week of 2011." News reports shine a light on the euro's stumble in November and December of last year and closed out the year as the worst performing major currency on the planet. Further, The NY Post and Financial Times report that it sank to a 10-year low against the yen and a one-year low against the US dollar.

As the NY Post puts it:

"The concern is that the data, particularly for some of the periphery countries, has deteriorated significantly" in Europe, said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney. "You would continue to see the euro under some pressure."

In Italy, Prime Minister Mario Monti is prescribing more "aspirin" to revive an economy that's probably in a recession and tackle almost half a trillion euros in debt sales after the worst year on record for Italian bonds.

The key to the euro's survival may lie with Italy, the region's second-biggest debtor after Greece.

The fall of 2011 closed out with speculation that Greece may leave the Euro and resurrect the drachma, its original currency, due to staggering debts and political deadlock on how to deal with the crisis. Meanwhile, the European Union has spent months dealing with the problem and only seems able to make small measures - small loans here, mild austerity there - as other nations deal with their imminent collapse as well. France, for example, is also in the midst of a debt crisis even as it works with Germany to help with the Greek drama.

One sign of a true recovery will be clear: When hedge funds start investing in the euro. Once that happens, we might start seeing some good returns for investors and, more importantly, the people on the troubled continent.

Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio
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