Aussie Shorts Reach Record as Bears Join BlackRock Seeing Slide

Investors are the most bearish on record about the Australian dollar as BlackRock Inc., the world’s largest money manager, expects the currency to plunge to levels well below what the Reserve Bank prefers.

The Aussie was less than 1 U.S. cent from its weakest in six years amid speculation Reserve Bank of Australia Governor Glenn Stevens will ease monetary policy, while his Federal Reserve counterpart prepares to raise interest rates. The greenback reached a 12-year high against the euro before Fed officials meet this week. Aussie bears are only outnumbered by those betting on declines in the shared currency, after the European Central Bank set its deposit rate at minus 0.2 percent and started buying bonds.

“Markets are expecting another rate cut by May,” said Yuji Saito, director of foreign exchange at Credit Agricole SA in Tokyo. “Stevens said in December he wants the currency down to around 75 cents, so I expect markets to push it below that level at least once.”

Australia’s dollar gained 0.2 percent to 76.56 U.S. cents as of 6:57 a.m. in London. It touched 75.61 on March 11, the lowest level since May 2009.

The U.S. currency dropped 0.3 percent to $1.0528 per euro after reaching $1.0458, its strongest since January 2003.

The RBA said further easing may be appropriate when it left borrowing costs at a record low this month.

Big Shorts

The difference between wagers by hedge funds and other large speculators on a decline in the Aussie against the greenback versus those on a gain -- known as net shorts -- increased to 76,851 in the week through March 10, the most on record, according to the latest data available from the Commodity Futures Trading Commission in Washington.

The Aussie’s record shorts last week reflect “concerns about China and expectations for further RBA easing,” Kevin Hebner, a New York-based foreign-exchange strategist J.P.Morgan Chase & Co. wrote in a note to clients.

China’s Premier Li Keqiang told reporters Sunday that policy makers will take action if the nation’s growth, which the government targeted at about 7 percent this year, drifts toward the lower limit of its range and cuts into employment or wages. A 7 percent expansion would be the nation’s slowest pace since 1990.

BlackRock, which oversees $4.65 trillion worldwide, said the Aussie may fall to 70 U.S. cents. The currency is already approaching the 75-cent level RBA Governor Glenn Stevens identified in December as his preferred exchange rate.

The net short position in the Australian dollar was the biggest among major currencies after the euro, which has dropped after the ECB introduced negative deposit rates and starting buying bonds to fend off deflationary pressures. Euro shorts increased to a three-week high of 181,073.

Dollar Parity

The euro may slide further, said Kengo Suzuki, chief currency strategist at Mizuho Securities Co. in Tokyo.

“Markets should be prepared to see fresh lows toward parity with the dollar,” he said.

The Fed meets Tuesday and Wednesday amid speculation the central bank will remove reference to patience from its forward guidance on the timing of monetary tightening, after data released March 6 showed unemployment fell to the lowest in almost seven years.

The dollar’s broad gains this month has left it vulnerable to a reversal, said Kyosuke Suzuki, head of the FX and money market sales department at Societe Generale SA in Tokyo.

“The accumulated long dollar positions may face a correction if stock markets undergo adjustments after the Fed meeting,” Suzuki said. Fed Chair Janet Yellen will probably express concern at the need to avoid premature rate increases at a news conference scheduled for Wednesday, he said.

“Depending on stock market moves, the dollar could fall toward 119.50 yen.”

The dollar was little changed at 121.24 yen. It climbed to 122.03 on March 10, the highest since July 2007.

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