Major hedge funds making bets against the euro-WSJ

Thu Feb 25, 2010 11:14pm EST

Related Topics

* Big hedge funds taking positions against euro-WSJ

* SAC, Soros, others attend private dinner in NY-WSJ

* Some managers say euro may hit parity with dollar-WSJ

* Traders also make bearish bets on euro-WSJ

NEW YORK, Feb 25 (Reuters) - Some major hedge funds are making substantial bets against the euro as Greece's debt crisis rages, the Wall Street Journal reported on Thursday.

Representatives of SAC Capital Advisors LP, Soros Fund Management LLC and others attended a private dinner in New York on Feb 8 at which a small group of hedge fund managers argued that the euro EUR= would likely fall to parity with the U.S. dollar, the newspaper said, citing people close to the situation.

The "idea dinner" was hosted by boutique research and brokerage firm Monness, Crespi, Hardt & Co. Three portfolio managers at the dinner spoke about investments related to the European debt crisis, the Journal said.

The euro has lost over 10 percent since late November as fiscal woes in Greece intensified, leading to a huge sell-off by investors.

SAC manager Aaron Cowen said all possible outcomes from the Greek debt crisis would drive down the value of the euro further, according to the newspaper report. But it added that SAC's trading position on the euro was unclear.

Brigade Capital hedge fund head Donald Morgan said the Greek crisis will likely spread and eventually affect U.S. companies, municipalities and Treasury securities.

David Einhorn, president of Greenlight Capital Inc, told the dinner he was bullish on gold because a pick-up in inflation was likely, according to the report.

An unidentified Soros manager said interest rates would likely increase, the Journal said.

Einhorn, George Soros of Soros Fund Management, SAC Capital Advisors, Monness, Crespi, Hardt & Co, and Brigade Capital were not immediately contactable for comment on the article.

Last week traders at Goldman Sachs & Co (GS.N), Bank of America Corp's (BAC.N) Merrill Lynch unit and Barclays Plc (BARC.L) placed bearish bets on the euro on behalf of investors in a move separate from the hedge fund dinner, the Journal reported, citing traders.

The euro hit a one-year low against the yen EURJPY=R on Thursday and lost 0.4 percent against the dollar at $1.3485 concerns over a potential downgrade of Greece's debt, while borrowing costs for peripheral euro zone countries rose.

Safe-haven government bonds firmed.

Credit agency Standard & Poor's said on Wednesday it may downgrade Greece's BBB-plus rating by one or two notches within a month, citing downside risks to growth that could hinder the country's deficit-cutting plan.

Moody's Investors Service said Athens would need to enact its fiscal reform plans as promised if it was to avoid a downgrade and Fitch Ratings said that, barring surprises, it expected to keep its BBB-plus rating unchanged for the next few months. (Reporting by Clare Baldwin and Jennifer Ablan; Editing by Kim Coghill)

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