Equity markets worldwide have recently become adjoined once again with the daily gyrations of the Euro currency in terms of returns and volatility.

With this said, the Euro currency itself has been anything but stable thus far in 2012. CurrencyShares Euro (NYSEArca: FXE) dipped as low as $125.75 in mid-December of last year, only to climb as $134.26 (6.7% from trough to peak) by late February of 2012.

However, in just a little more than 3 month’s time, FXE has plunged to new lows, closing at $124.48 a share last Friday (7.3% decline from peak to current levels).

Institutions have been paying attention and are apparently concerned with prolonged weakness in the Euro, as levels of short interest in the currency via related derivatives including futures and options on the Euro have grown to 2007 levels according to a Bloomberg story this past weekend.

However, short interest bets were near current levels back in December of last year as well, and when the tide turned suddenly in the Euro, the massive short interest on the sidelines provided the fuel for a major 2 month reversal in the Euro as it suddenly gained in terms of valuation against other world currencies.

As May draws to a close, will we see a similar effect on the price of the Euro if indeed some “good news” ever comes out of Europe for a change, and will the shorts close their positions aggressively into any strength in the underlying currency?

It all remains to be seen, but there are a number of ETPs that allow portfolio managers to speculate, or hedge in either direction.

FXE  is designed to track the change in the spot rate (EUR/USD) of the Euro versus the U.S. Dollar.