Hedge Funds Added Long Pound Bets Before Brexit Talks Collapsed

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Hedge funds raised their long bets on the pound to the highest in over five months just beforetalks between the U.K. and European Union took a turn for the worse.

Net futures and options positions held by leveraged funds rose by7,591 contracts to 10,173 in the week through Sept. 8, highest since March 24, according to data aggregated from the Commodity Futures Trading Commission. Asset managers took the opposite approach, adding to their net shorts by 6,223 contracts to 8,821 during the same period.

The moves came just before Prime Minister Boris Johnson’s governmentrebuffed an EU request to scrap his plan to re-write the Brexit divorce accord. Sterling has slumped more than 3% against the dollar this year, the worst performer among Group-of-10 currencies.

The pound advanced 0.3% against the dollar to 1.2830 as at 6:57 a.m. in London after falling 3.6% last week.

Cable could drop to the 1.26 level as Brexit risks climb, according to Laura Fitzsimmons, JPMorgan Australia Executive Director, Macro Sales. “The market had been lulled into a false sense of security on Brexit because the pound had done so much better, but that was a dollar weakness story and it’s now coming home to roost,” she said in an interview with Bloomberg Television.

— With assistance by Gregor Stuart Hunter

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