There’s a rumour buzzing around Australian media that George Soros has made a killing in recent days shorting the Australian Dollar.
There doesn’t seem to be much to it, other than that someone placed some big anti-Aussie bets at some big brokerages, and the currency fell yesterday after the Reserve Bank of Australia cut interest rates.
But the rate decision aside, people have been negative on the Australian dollar for a while now.
The reason? China is slowing and the commodity business is booming, and that should be bad news for the Australian dollar which is tied tightly to both of those things.
Michael McDonough of Bloomberg Briefs tweeted out this picture showing the Aussie dollar vs. the RBA Commodity Price Index. While the commodity price index has weakened considerably, the Aussie remains strong.
Anyway, the strength of the Aussie dollar was enough to get the attention of the Reserve Bank of Australia itself, which said in its latest statement:
“the exchange rate has been little changed at a historically high level over the past 18 months, which is unusual given the decline in export prices and interest rates during that time”
In a note today, Citi’s Steven Englander answered the question of why the Australian dollar is hanging on so well. Basically, commodities are only partly the story. Other aspects include the Chinese currency itself (which has been strengthening) and volatility (which has been low). Low volatility is usually associated with a “risk on” mode, so basically although commodities are slumping, the general mood is bullish, and that’s historically good for the currency.