The Australian dollar’s world-beating rally in the past three months and bets it will extend those gains are fueling speculation policy makers will try to talk down the currency.
The Aussie strengthened at least 1 percent against all its Group of 10 currency peers since the middle of March and a trade-weighted index climbed to the highest since November yesterday, as the European Central Bank set negative interest rates this month. The cost of three-month contracts allowing sales of the Australian versus the U.S. dollar is near the least expensive versus those to buy since July 2009. Net futures positions betting on gains are the most since April 2013.
The Aussie has rallied as low rates in Europe, the U.S. and Japan encouraged investors to borrow in those countries and seek higher returns overseas in carry trades. The Reserve Bank of Australia reiterated today in minutes of its June 3 policy meeting that the currency was high by historical standards, particularly given the slide in commodity prices.