The borrowing of euros by traders to invest in global assets is rising in a shift that banks say marks the start of a revival of so-called carry trade in currency markets.
Reduced expectations of a third round of quantitative easing of monetary policy in the US combined with predictions that the European Central Bank will cut interest rates further are leading global investors to use the euro as a funding currency for carry trades.
Such trades benefit from a fall in the euro as traders typically borrow the funds in the single currency, then sell it to take positions with other currencies. When they pay back the borrowings, the traders then benefit from any fall in the euro.
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