SocGen’s currency strategist Sebastien Galy said in a research note today exchange rate movements in the Brazilian real could soon become disorderly as retail foreign exchange investors likely unwind their bets on the currency rising amid an escalating European debt crisis.
“For now, it is an orderly process, but we are now on the edges of a disorderly one. While hedge funds and to a lesser amount asset allocators have already bailed out, retail has not.”
According to the bank’s analysis (via Dow Jones), while only around 10% of institutional investors are positioned for gains in the real, the majority of retail positions remain despite a nearly 20% depreciation in the currency since February.
Apparently, this is the chart that he is using to back up his story…