Marco Funds Ramp Up Option Bets on Aussie After Currency Rally

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(Bloomberg) — Macro hedge funds have increased bets on the Australian dollar, boosting exposure to options that pay off if the currency continues climbing against major peers, traders say. 

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The Aussie logged its two busiest days of option activity versus the dollar last week since late July, Depository Trust & Clearing Corporation data show. On both days, call option volume — contracts that profit when the currency rises — was triple that of puts, with trades of A$150 million ($100 million) or more. The surge came as the Australian dollar touched its strongest level against the greenback since November.

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“We have seen sustained interest for AUD call options versus other currencies as the macro community looks to accumulate positions for a potential breakout,” said Ivan Stamenovic, head of Asia Pacific G-10 FX trading at Bank of America Corp.

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The Australian dollar is September’s second-best performing major currency, trailing only Norway’s krone. Macro funds are betting its outperformance will extend in the weeks ahead, fueled by resilient household spending, stronger-than-expected growth, rising commodity prices and hawkish Reserve Bank of Australia signals. Governor Michele Bullock said earlier this month that robust consumer demand may limit the scope for rate cuts.

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Macro funds aren’t just wagering on the Aussie against the greenback. The currency has also climbed to multi-month highs versus other Group-of-10 peers.

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Against the Canadian dollar, the Aussie is at its strongest since November, buoyed by weak Canadian growth and labor data. Those reports pushed traders to price in higher odds of a Bank of Canada quarter-point rate cut on Sept. 17. On one of the busiest Aussie dollar option days last week, every trade larger than A$50 million versus the Canadian dollar was a call option, the DTCC data show.

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The Aussie has also reached its highest since mid-June against the Swiss franc, after Swiss National Bank President Martin Schlegel signaled the central bank would not hesitate to push rates back below zero if needed.

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“We have seen interest from hedge funds to express a bullish AUD/USD view via AUD call options in the last two weeks,” said Troy Fraser, head of foreign-exchange sales for Australia and New Zealand at Citigroup Inc. in Sydney. “AUD/CAD and AUD/CHF have also been popular pairs to express this bullish Australian dollar view.”

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