Hedge Fund’s Short AUD Strategy Gaining Investors Interest

European investors are backing Excalibur Funds Management Pty’s call for the Australian dollar to slump to 75 U.S. cents, reflecting record bets from speculators on declines in the currency.

Institutional investors placed $200 million with the Sydney-based hedge fund’s Australian dollar-only strategy since it started July 17, Matthew Harper, a principal and trader at Excalibur, said in an interview Aug. 22. Hedge funds and other speculators swung from record bets on Aussie gains in December to the most wagers ever this month that the currency will fall.

The local dollar slid 15 percent from a peak in April as China’s slowdown sapped demand for the nation’s commodities and the Reserve Bank cut benchmark rates to a record, eroding the currency’s high-yield status. Harper forecast the spread between Australian and U.S. 10-year government yields, now more than 1 percentage point, will converge by mid-2014.

“There are a lot of headwinds ahead for the Australian dollar,” Harper said. “We can’t rely on China, which we have for the last four or five years.”

The Aussie, the world’s fifth-most traded currency, was at 89.81 U.S. cents as of 1 p.m. in Sydney, after reaching an almost three-year low of 88.48 cents on Aug. 5. Its 14 percent loss this year is the steepest slide among the Group of 10 major currencies.

Bloomberg

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