Excalibur hedge-fund: sell the Aussie
European institutional investors placed $200 million in the Aussie-selling strategy of the Sydney-based Excalibur Funds Management hedge fund. The fund forecasts AUD/USD to fall to $0.7500 in the long run as RBA is expected to lower benchmark rate to 2.0%.
A leading trader at Excalibur Matthew Harper expects the spread between Australian and U.S. 10-year government yields to converge by mid-2014 (now it is more than 1%). “Traditionally the Aussie has been in demand for its yield and when the carry or interest-rate differential is no longer positive, global demand for the currency falls dramatically".
What’s more, the Australian currency could test the levels below $0.6000 (2008 low) if the economy enters a recession. Harper sees as a 30% chance of that by 2015. “There are a lot of headwinds ahead for the Australian dollar,” Harper sais. “We can’t rely on China, which we have for the last four or five years. China’s growth is going to be 5 percent in a couple of years. We are in a downward spiral.”
Chart. Monthly AUD/USD