Australian dollar catches hedge funds pants down

Via Bloomie:

Goldman Sachs Asset Management is clashing with speculators in a wager on a weaker Australian dollar, just as those hedge funds top up bets on the currency appreciating.

Philip Moffitt, the Asia-Pacific head of fixed income at Goldman Sachs Asset Management, sees the dollar Down Under falling as the country’s central bank raises interest rates at a slower pace than many of its developed-world peers. By contrast, leveraged accounts — often hedge funds — last week boosted positions that pay off if the Aussie strengthens to A$8.6 billion ($6.7 billion) worth of contracts, the highest level since 2013.

Goldman is far too hawkish not dovish making the hedgies position extreme.

My advice to said hedgies is sell. The RBA ain’t going to tighten with households choking. And that is not going away as:

  • the Botox Boom fails to lift wages;
  • the energy shock roars on;
  • house prices stall and fall;
  • lowflation carries on and the RBA looks though energy prices;
  • shares go nowhere;
  • terms of trade falls resume.

I might add China slows and the Fed tightens.

Policy convergence is a lazy idea unworthy of macro hot money. If they were long AUD with my dough I’d be pissed!


  1. I am really quite surprised that so many people became bullish AUD at 80c to higher.
    Even if not all your things eventuate – just take household debt at 123% of GDP and repricing of mortgages to reward principal and interest – how could RBA possibly raise rates.
    I am quite astonished how wrong commentators get it.

    The question is DXY – I thought it would bounce but keeps drifting off. We need to see a clear break of 95 maybe.

    I think it’s pretty safe to say we will test into the AUD 60s sometime in the next 6 months

    • You have to wonder what the hell these guys are thinking to believe our economy and thus dollar is going so well it should be 80+

      • Its not ‘our’ dollar. It’s a gimp currency. It will skyrocket once more and burn many when the global bubble ubiquity ends. We will have zero choice in the matter.

    • “The question is DXY”

      Exactly. There are certain scenarios that may cause USD to crash (e.g. dedollarisation). If shorting AUD/USD you may end up being right about AUS economy turning to crap yet still get burnt on the short AUD/USD trade.

      IMO, a more prudent thing to do would be to short the AUD index (TWI) instead:

      • I think the greater concern is hedgies leveraging up on a long AUD trade. It might pay off, but it’s just as likely (more likely imo) NOT to pay off. Madness!

  2. oh ho ho, leveraged long position on AUD! Yikes! LOL

    The more they get burnt, the less inclined they’ll be to mess with the little aussie battler in future…wishful thinking.

  3. Goldman economics are amongst the most hawkish around predicting 2 RBA hikes next year, first one in February.
    IN summary their view is resi construction cycle a very slow melt (agree), commods stronger for longer (disagree), much more public infra (disagree, seems like we are near the peak).