(Feb 9): Leveraged money managers lifted their bullish bets on the Australian dollar to the highest level in over eight years, wagering that projected gains in bond yields will cushion near-term volatility.
Hedge funds and other large speculators increased net-long positions by 43% to 57,115 contracts in the week ended Feb 3. The level was the highest since late 2017, according to Commodity Futures Trading Commission data.
The buildup in long positions highlights growing confidence that Australia’s relatively high yields and expectations that the Reserve Bank of Australia will keep rates higher for longer were supporting the currency. Investors have been drawn to the Aussie’s yield advantage, with swap markets now almost fully pricing in another rate hike in June.
“The Australian dollar is uniquely positioned with a hiking cycle underway,” JPMorgan Chase & Co strategists, including Ben Jarman, wrote in a note. The bank raised its AUD/USD near-term target to 0.73 US cents from 0.68, citing catalysts such as “changing FX hedging behaviour and net portfolio flows supported by strong fiscal metrics.”
Australia’s central bank raised its key interest rate last Tuesday (Feb 3), the first major monetary authority to hike this year.
See also: BofA joins Goldman Sachs to boost yuan forecast
Uploaded by Arion Yeow
