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.