AE Capital cuts profitable Aussie short

[SINGAPORE] AE Capital, a hedge fund run by a former atmospheric scientist, trimmed bets against the Australian dollar as it gauges shifts in the world's two biggest economies.

The Australian, Canadian and New Zealand dollars will likely be the most sensitive to changes in the outlook for US interest rates and for the economy in China, the biggest consumer of raw materials, said its Melbourne-based Chief Investment Officer Lyle Pakula. The three are among the four worst performers in the Group-of-10 currencies this month as traders boosted bets the Federal Reserve will raise rates as early as June. Mr Pakula says they could rally if the US central bank delays or should commodity prices resume gains.

AE Capital made about 6 per cent in the first four months of the year, according to the manager, outperforming the average 0.4 per cent return of other hedge funds tracked by data provider Eurekahedge Pte. The fund, which uses computer algorithms to trade in financial markets, had bet on a decline in the Aussie against the greenback in late April, before cutting its position on May 20, Mr Pakula said. The currency had dropped below 72 US cents, from a 10-month high of 78.35 reached lat month, after the Reserve Bank of Australia reduced its benchmark rate to a record low in May.

"I don't think you're going to see another 6-to-7 cent drop in the Aussie in the short term," Mr Pakula, 37, said in an interview in Singapore. "You'd need some massively positive US data and very negative Australian data to really push through that barrier." The Aussie has tumbled 4.9 per cent this month to 72.30 cents as of 12 pm in Sydney on Tuesday. The currency gained as much as 0.7 per cent following economic reports on building approvals and net exports.

BLOOMBERG