Futures traders have turned bullish on the Australian dollar for the first time in 11 months, as the currency climbed as much as 9 percent from a 3 1/2-year low reached in January.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 3,310 on April 8 , compared with net shorts of 4,880 a week earlier, figures from the Washington-based Commodity Futures Trading Commission show.
Australia’s dollar has rallied more than 5 percent against its U.S. peer this year -- the most among developed-nation currencies after the New Zealand dollar -- helped by Reserve Bank of Australia Governor Glenn Stevens signaling in February an end to interest rate cuts.
“There’s been a shift in sentiment -- largely because the Australian domestic data has been better than expected -- and I expect that theme to continue,” said Imre Speizer, a market strategist at Westpac Banking Corp. in Auckland. “Positioning historically tends to oscillate between extremes -- with extreme shorts then moving to extreme longs.”
The central bank will begin raising borrowing costs in the first quarter of 2015, according to the median forecast in a survey by Bloomberg, following 2.25 percentage points of cuts to its benchmark rate since late 2011 brought it to a record-low 2.5 percent.
China’s producer price index declined 2.3 percent in March, adding to signs of weak demand after data yesterday showed shrinking trade. The country is Australia’s biggest trade partner.
“Investors have been buying Australia and Canada like there’s no tomorrow,” Steven Englander, managing director and Global Head of G10 FX Strategy at Citigroup, said in a phone interview. “Those are currencies that are going to turnaround. They might not turn around in the next day or two, but the global environment isn’t going to support their making much more gains.”
Citigroup’s Economic Surprise Index for Australia reached the highest in a year yesterday, after the Australian Bureau of Statistics reported employers added 18,100 positions in March, exceeding the median forecast among economists surveyed by Bloomberg News of an additional 2,500 jobs. That followed an increase of 48,200 jobs in February, the most since March 2012. The unemployment rate fell to 5.8 percent last month.