Hedge funds are reducing trades with AUD
Hedge funds are reducing trades with AUD
The Australian and New Zealand dollars fell on Friday, as interest rate projections undermined demand, while the G-20 meeting at the end of this month keeps investors from risky actions in the market.
The Australian dollar fell by 0.24% to $ 0.6892 and fell 1.5% over the week, showing the largest decline since mid-May. The New Zealand dollar fell by 0.4% to $ 0.6529, a decrease of 2% over the week.
The movement of futures for bonds suggest that the likelihood that the Reserve Bank of Australia will continue its easing interest rate by a quarter of a point in July. The probability of such a development is estimated at 66%. If this does not happen, then a decrease to 1% in August is considered a practically solved case.
Markets also raised forecasts for rate cuts by the Reserve Bank of New Zealand.
Rising expectations of lower interest rates due to weak fundamental data caused the weakness of the Australian dollar while the global trade tensions also affect its demand.
The weakness of the Australian dollar has pushed investors to curtail some of their carry deals, where traders borrow in low-yielding currencies, such as the Swiss franc, and invest in relatively high yields, such as the Australian dollar.
The AUDCHF cross rate, considered a barometer for this kind of trading, fell by almost 6% in eight weeks, indicating that hedge funds were losing money at such deals.
The US dollar rose on Friday and thus demonstrated the largest weekly increase in three weeks before the release of data on retail sales in the United States. According to forecasts, sales growth should reach 0.3% in May compared with 0.1% in April. p> Due to the fact that investors are making quite optimistic forecasts for the Fed to lower interest rates in the coming weeks, they do not rule out that stronger than expected retail sales data could undermine some of these forecasts and push the dollar up.
Bond markets estimate with a 28% chance of interest rate reduction next week. Against the basket of its competitors, the dollar rose 0.1% to a weekly high of 97.09.
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