China is dragging Australia down with it.
Hedge funds are betting against the Australian dollar as Chinese stocks continue to fall, the Wall Street Journal reports. The Aussie has fallen in recent years, and is extending losses in the wake of the Chinese stock market rout in the last month. The Aussie dollar droopped to $0.74 from $0.77 on June 9. China is a big source of exports for Australia.
Leveraged fund bets on the Australian dollar’s descent were up 60% between May 19 and July 7, according to the U.S. CFTC. Scotiabank also shows that after briefly going long in May, investors are net short on the Aussie. Writes the Journal:
“We’ve seen big positions in the Australian dollar as a result of that (the slowdown in China),” said Kevin Arenson, chief investment officer at Stenham Advisors PLC, which runs $3.2 billion in assets.
Fund managers are torn on whether the Aussie has run its course, or if China will continue to tumble with it.
“It really does depend on China, but I wouldn’t be surprised if you’ve seen the worst (of the decline in the Aussie) for now,” said one hedge fund manager.
Photo: Claire L. Evans via Flickr.