By SAM FLEMING Last updated at 12:40 PM on 09th February 2010 Traders and hedge funds are making record bets against the euro, underlining the mounting alarm over the region’s debt crisis. Market players have bet almost £5billion that the value of the currency will fall against the U.S. dollar, the largest ‘short position’ since it was launched. European governments have been drawing up plans for a possible bail-out of Greece, amid fears it could be spiralling towards debt default. Worries about the health of public finances are also spreading to other countries. Greek one euro coins: Concerns over the country's public finances have hit the value of the single currency Speculators believe these states will be unable to meet their obligations to lenders and have taken up a short position on the currency. More than 40,000 deals have been made betting against the single currency, according to analysis of figures from the Chicago Mercantile Exchange. Some analysts claim the crisis is so deep the future of the euro could be put in peril, driving the value of the single currency lower. Yesterday sterling traded at 1.14 euros. The numbers underline the growing sense of panic about the euro zone’s ability to cope with the government debt turmoil. Economist Richard McGuire of RBC Capital Markets said: ‘It is almost as if the banking crisis is now being replayed in the sovereign (government debt) space. The market concerns have this almost self-fulfilling quality to them.’ Politicians are desperately trying to convince market players that they are serious about taking the debt-cutting measures needed to shore up their national finances. Traders have taken out record-breaking short positions on the euro, betting that the Greek debt crisis drives the value of the currency lower But in Greece, the eye of the current storm, opposition to public spending cuts is growing. Some 600,000 state workers, from teachers to tax collectors, are planning to strike for 24 hours later this week as they protest the austerity measures planned by Prime Minister George Papandreou. Fiscal woes are hardly confined to the euro zone, however. British government bonds took a fresh hit amid claims the UK bears alarming similarities to those of Greece, Portugal and Spain. The implied interest rate on the UK’s 10-year gilt jumped to 3.95 per cent after former International Monetary Fund chief economist Simon Johnson warned Britain could face ‘big trouble’ if it fails to rein in public borrowing. The gap between the UK Treasury’s cost of borrowing and that of the German government leaped to 0.8 of a percentage point, equal to recent record highs. ‘The financial markets are taking a long hard look at the fiscal accounts of all these countries and they don't like what they see,’ said Johnson in a BBC interview. ‘And I have to add the UK to this list. Unless you can persuade the markets that you're really going to bring the budget under control within the foreseeable future … you're going to have big trouble.'Traders splash £5 billion betting against the euro as the single currency falters amid debt crisis
Tuesday, 9 February 2010
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