Aussie Shorts Dropping to May Low Hold Currency Near 2014 High

Australia’s dollar traded 0.3 percent from a more than four-month high against the greenback after traders cut bearish bets to the least in almost a year.

The Aussie retreated following a three-week gain as an index of Asian stocks fell for the first time in nine days. Hedge funds and other large speculators cut so-called net shorts in the currency to 4,880 contracts last week, the fewest since they shifted to a bearish position in the five days ended May 14, the latest figures from the Washington-based Commodity Futures Trading Commission show. Net shorts were at a record high of 76,779 in August.

“With recent domestic data showing signs of improvement, the market has been very quick to remove shorts,” said Robert Rennie, Sydney-based head of currency and commodity strategy at Westpac Banking Corp. “Short term, momentum is still up for Aussie.”

Australia’s currency slipped 0.1 percent to 92.86 U.S. cents as of 5:15 p.m. in Sydney from April 4, when it reached 93.08, the highest since Nov. 21. It gained 2.9 percent over the previous three weeks.

The MSCI Asia Pacific Index of stocks slid 0.5 percent, poised to end its longest winning streak this year.

“A little bit of consolidation today is really the name of the game, and profit taking after the strong rally we’ve seen in the last week or so,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “Aussie is looking rather toppy around 93 U.S. cents.”

Economic Surprises

The Australian dollar has risen as Citigroup’s Economic Surprise Index for Australia reached the highest since May last month. The nation’s employers added 47,300 workers in February, more than triple the median estimate of economists in a Bloomberg News survey and the most since March 2012. Last month’s data is due April 10.

The Reserve Bank of Australia will start raising interest rates in the first quarter of 2015, according to the median forecast from a survey of 30 economists by Bloomberg. The yield on Australia’s 10-year government bond fell seven basis points, or 0.07 percentage point, to 4.08 percent.

New Zealand’s dollar was supported after Quotable Value New Zealand, a government-owned property research company, said house prices rose 8.8 percent in March from a year ago.

The currency rose 0.1 percent to 86.09 U.S. cents, and gained 0.2 percent to NZ$1.0787 per Australian dollar.

Kiwi net longs rose to 18,480 contracts last week, the most since the five days to May 14. The currency has gained 4.7 percent against the greenback this year, the best performer among its Group of 10 peers. Aussie is second, with a 4.1 percent advance.

‘Corrective Rebound’

Standard Chartered Plc predicts the Australian dollar’s drop to the weakest in eight years against its New Zealand counterpart is at an end.

“A potentially powerful corrective rebound looks likely in the weeks ahead,” Standard Chartered analysts Divya Devesh and Ned Rumpeltin wrote in research note dated April 3. “Most NZD good news is priced in.”

The Aussie touched NZ$1.0493 on Jan. 24, the weakest since December 2005, following a 24 percent slide from a high of 1.3796 in March 2011.

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