* Assets in "short" sterling ETFs fall to 2 1/2-year low
* ETF investors taking contrarian view: ETF Securities
* "Long" sterling assets hit 4-year peak
By Atul Prakash
LONDON, Oct 10 The British pound's slide to a
31-year low against the dollar on Friday came as one gauge of
market sentiment showed that some investors were actually more
positive on the currency's outlook than they have been for
The value of assets managed by exchange-traded funds that
allow investors to bet on a weaker pound fell to a 2 1/2-year
low on Friday, continuing a trend that began just after
Britain's June 23 vote to leave the European Union.
Similarly, the value of assets held in ETFs allowing
investors to go "long" the pound, or bet on its strengthening,
rose to the highest in almost four years, figures provided by
ETF Securities on Monday showed.
Graphic: Long/short sterling ETFs: reut.rs/2e8eBtC
That contrasts with the currency market at large, which has
taken fright at what Brexit might mean for the British economy.
Sterling fell below $1.20 in increasingly volatile
trade last week, and speculators on Chicago futures markets have
amassed record bets against the pound.
"We are witnessing a clear contrarian trading behaviour,"
said James Butterfill, head of research and investment strategy
at ETF Securities. "It seems a lot of (ETF) investors are of
the view that sterling has bottomed or hovering near the bottom
and a 'hard Brexit' is already priced in."
Total assets held by ETFs allowing investors to
"short" or sell the pound fell to $51.1 million on Friday, down
from $280 million on June 23 and the lowest since March 2014.
The assets in "long" sterling ETFs were worth $39
million, the highest since November 2012, according to ETF
Securities, which says it has a 99 percent share in the European
foreign exchange ETF market.
ETFs are popular among retail investors who otherwise find
it expensive to short currencies or take part in complex trades
that often require derivatives and leverage.
ETF Securities' currency exchange-traded products are based
on Morgan Stanley's foreign exchange indices, and use forward
contracts and swaps to replicate the performance of the
These sums are relatively tiny, however, compared with the
value of currency futures contracts traded on the Chicago
Data published on Friday showed that speculators such as
hedge funds increased their net short sterling positions on the
CME to a record 97,572 contracts in the week to October 4.
That's worth around $8 billion.
Those positions don't capture the selling early on Friday
morning in Asia, when the pound plunged as low as $1.1491 before
recovering. On Monday, it was changing hands around $1.24.
(Reporting by Atul Prakash and Jamie McGeever; Graphic by
Vikram Subhedar; Editing by Larry King)