Options Most Bearish on Euro Since 2003

By Liz Capo McCormick and Lukanyo Mnyanda
Sep 13, 2011 8:44 AM PT

Options traders turned the most bearish on the euro this week in almost eight years, signaling the currency may extend its 4.8 percent drop this month, as Europe struggles to stem the sovereign-debt crisis.

The premium for options granting the right to sell the euro over those that allow for purchases reached the most yesterday since at least October 2003, when Bloomberg began tracking the data. Bets on a drop in the 17-nation currency outnumbered wagers on a gain last week by the most since January, reversing a so-called net-long position two weeks ago.

The slide in the euro reflects waning confidence that Europe will avert a Greek default and contagion infects banks, while German growth stalls. ECB President Jean-Claude Trichet, who as recently as June 30 signaled the need for higher borrowing costs, said Sept. 8 that there were “downside risksâ€