Australian dollar catches hedge funds pants down

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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:

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  • 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!
About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.