Hedge funds rush to buy AUD call options ahead of Reserve Bank of Australia decision

Golden Ten Data reported on March 12 that ahead of next week's Reserve Bank of Australia interest rate decision, hedge funds are increasing their bullish bets on the Australian dollar through the options market. Data from the Chicago Mercantile Exchange shows that on Wednesday, the trading volume of call options betting on the rise of AUD/USD reached six times that of put options. Meanwhile, three out of Australia's four major investment banks expect the Reserve Bank of Australia to raise interest rates by 25 basis points on March 17. Anand Goyal, Head of FX Sales for Financial Institutions in Asia Pacific at Citi Group in Singapore, said: "We are seeing macro hedge funds seeking renewed upside exposure to the Australian dollar through call options, mainly against the US dollar, but also increasing against the New Zealand dollar." He pointed out that Australia's higher front-end interest rates make it an ideal target for carry trades, and as the market increasingly believes the broad rally of the US dollar is nearing its end, these factors will boost the Australian dollar.