By Patrick Graham and Anirban Nag
LONDON (Reuters) - Market expectations for euro exchange rates over the next three months flipped on Wednesday into positive territory for the first time since 2012, a headache for euro zone officials hoping for a boost to growth from a weaker currency.
Steady progress since October, allied to the drop in the dollar's value on Wednesday, mean that 1-, 2- and 3-month euro/dollar risk reversals -- a gauge of bets on a currency rising or falling -- now price in a gain in the euro, according to Reuters data. <EURVOL=>
The pricing of options of six-months durations and beyond has also shifted from backing further strong falls in the euro to close to 50-50 odds on whether it will rise or fall. <EUR6MRR=> <EUR1YRR=>
That follows signals from European Central Bank chief Mario Draghi that it was ready to ease policy further in a campaign that has weakened the single currency since early 2014 but struggled to make further headway in the past year.
"This rise in the euro and the flipping in bearish euro bets to bullish ones in the options market puts Draghi in a tight spot," said Ned Rumpeltin, European head of FX strategy at TD Securities.
"...The ECB is hamstrung because the problem is investors are looking to trade a weaker dollar rather than euro strength. There is a chance of a recession in the U.S. economy and we are getting mixed signals from policymakers."
Many analysts say this reflects a broader change in the backdrop for the major currency pairs due to the worsening of expectations for the global economy and resulting turmoil on financial markets.
"If the environment is going to be risk-off then that does send you back to saying buy the euro and yen," said Simon Derrick, chief currency strategist at BNY Mellon in London.
"That is clearly a big problem for the Japanese and European central banks. What do they do: reduce rates to -5 percent?"
(editing by John Stonestreet) OLGBBUS Reuters UK Online Report Business News 20160204T142245+0000