Hedge funds make bets on rise in sterling

Michael Bow
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TRADERS have ramped up their bets on sterling, with a big jump in the number of hedge funds taking long positions in the pound in expectation of a rate hike, US data shows.

Long contracts on sterling rose 38 per cent higher versus the prior week, up from 33,572 at the start of April to 46,477, led by a surge of interest from hedge funds, data from the Commodity Futures Trading Commission (CFTC) shows.

Analysts at Deutsche Bank said sterling was still the most popular long position of all G10 currencies.

Long contracts indicate a trader thinks a currency will rise, while a short contract is a bet that it will fall.

Hedge funds are anticipating a rate hike from governor Mark Carney sooner rather than later due to the UK’s strengthening economy, and the mood has helped send long bets on sterling to their highest levels since 2009.

Yet the CFTC figures show traditional asset managers do not share the same optimism of their hedge fund peers for sterling’s rise, with fund managers cutting their long positions a little last week and adding to short positions.