Hedge Funds Split From Asset Managers on Fate of Falling Aussie

Hedge Funds Split From Asset Managers on Fate of Falling Aussie

Fast-money funds have flipped to bullish bets on the beleaguered Australian dollar just as their more traditional institutional peers double down on bearish wagers.

Leveraged funds switched to net-long Aussie positions for the first time since August 2021, according to the latest Commodity Futures Trading Commission data for the week through May 3. At the same time, asset managers doubled their net-short bets to over 33,000 contracts, the data showed. 

Australia’s currency has tumbled about 7% against the greenback since its year-to-date high in April as traders bet on a slowing Chinese economy, and U.S. rate hikes outpacing those at home. The growth-sensitive Aussie is a popular barometer of investor sentiment in the FX market.

It traded around 70.5 U.S. cents early in Asia on Monday.

The Aussie could prove the “chief victim among G-10 currencies” because of Chinese exposure “on top of its traditional vulnerability to downdrafts in risk sentiment,” John Hardy, head of FX strategy at Saxo Bank, wrote in a note. The 70 U.S. cent level will be a “pivotal” point to watch for the currency, he said.

Speculators bullish on Aussie for first time since August 2021

Aussie has dropped 7% in the past month as sentiment soured