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Euro near eight-month low as short bets surge to most since 2012

Candice Zachariahs & Kevin Buckland

The euro was 0.4 percent from its lowest level versus the dollar since November as investors held the largest position in two years betting on a drop in the currency before the region’s central bank meets this week.

Europe’s common currency slid 3.2 percent in the past three months amid unprecedented stimulus as the European Central Bank acted to spur inflation that slowed in July to the weakest in almost five years. Policy makers meet again Aug. 7. Australia’s dollar rose a second day after retail sales in the nation climbed at twice the pace economists forecast. The greenback held gains versus most major peers with data tomorrow predicted to show growth in services activity accelerated.

“The trend in euro is clearly down, and we think that story’s got further to run,” said Imre Speizer, a markets strategist at Westpac Banking Corp. in Auckland. “Draghi will maintain his dovish tone for sure, given the inflation data across Europe has been mostly weak,” he said, referring to ECB President Mario Draghi.

The euro was little changed at $1.3419 as of 11:01 a.m. in Tokyo after touching $1.3367 on July 30, its lowest level since Nov. 12. It traded at 137.76 yen from 137.78. The yen changed hands at 102.66 per dollar after dropping 0.8 percent last week to 102.61.

The Bloomberg Dollar Spot Index was at 1,020.85, little changed from last week when it added 0.7 percent, the most since the period ending Jan. 17. It touched 1,023.42 on Aug. 1, the highest since March 20.

Sufficient Magnitude

The ECB will this week probably keep policy rates unchanged as recent data hasn’t been of “sufficient magnitude (yet) to warrant an immediate policy response,” New York-based Royal Bank of Canada strategist Elsa Lignos wrote in a note to clients.

Consumer prices rose 0.4 percent from a year earlier in July compared with a gain of 0.5 percent in June, a July 31 report showed. That was the weakest since October 2009 and below the median forecast in a Bloomberg News survey.

Futures traders’ bets that the euro will decline against the U.S. dollar rose to the most since August 2012, figures from the Washington-based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on an depreciation in the euro compared with those on a rise -- net shorts -- was 108,075 on July 29, compared with 88,823 a week earlier.

Retail Sales

Australia’s dollar gained as much as 0.2 percent after a statistics bureau report showed retail sales rose 0.6 percent in June from the previous month, compared with the median prediction in a Bloomberg survey of 0.3 percent. The local currency gained 0.1 percent to 93.21 U.S. cents after dropping 0.9 percent last week.

In the U.S., data tomorrow is forecast to show the Institute for Supply Management’s non-manufacturing index rose to 56.5 in July from 56 in June, according to a separate survey. Readings greater than 50 signal expansion.

The dollar was the best performer over the past month among 10 developed-market currencies tracked by Bloomberg Correlation- Weighted Currency Indexes, adding 1.4 percent. The euro was little changed and the yen climbed 0.8 percent.

[Bloomberg]

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